Power Companies Crash as China’s AI Debut Erases Expectations for Massive Energy Demand
The debut of China’s DeepSeek open source AI laboratory led to a plunge in the stock prices of power companies most exposed to the tech sector’s data center boom. Constellation Energy, Vistra Corp, and GE Vernova tumbled, with Constellation and Vistra dropping over 16% and GE Vernova sliding 18%.
In the past, these companies have led the S&P 500 this year as investors speculated that AI data centers would boost demand for massive amounts of electricity. However, the release of DeepSeek’s AI model has raised questions about the actual energy consumption of artificial intelligence applications.
The CEO of Scale AI described the DeepSeek model as “earth-shattering,” while DeepSeek has since risen to the top of mobile app stores with its reasoning model, DeepSeek-R1. Microsoft CEO Satya Nadella has praised DeepSeek as “super-compute efficient.”
Bank of America analysts have said that DeepSeek is challenging the notion of U.S. leadership in AI and raising doubts about the high expectations for cloud capex, chip growth, and power requirements. As a result, investors are questioning whether the anticipated massive energy demand for data centers will materialize.
The companies had previously looked to nuclear power as a source of reliable, carbon-free energy to supply their data centers. For example, Constellation has signed a power agreement with Microsoft to restart the Three Mile Island nuclear plant, while Talen is powering an Amazon data center with electricity from the nearby Susquehanna nuclear plant. Vistra has also been expanding its natural gas and nuclear assets, which investors see as promising. However, Bank of America analysts remain confident that grid investment in the U.S. and Europe is still required to meet load growth requirements.
