DeepSeek's Promise of Energy Efficiency Darkens Power Stocks
Jan 29, 2025 - financialpost.com
The article discusses the significant selloff in energy stocks caused by the Chinese AI startup DeepSeek, which impacted not only technology stocks like Nvidia but also energy companies crucial to AI infrastructure. Vistra Corp. experienced a 28% drop, its worst on record, losing $18.4 billion in market value, while Constellation Energy Corp. fell 21%, erasing $22.8 billion in market capitalization. The decline has led to a split among Wall Street strategists regarding the sector's outlook, with some seeing it as a buying opportunity due to the essential nature of power, despite the AI competition. Analysts like JPMorgan's Jeremy Tonet suggest the selloff is overdone and recommend buying into power producers, anticipating wider adoption of AI due to lower inference costs.
The article also highlights the comparison made by Barclays analysts between the current drop in AI and power equipment stocks to past market events, such as the dotcom bubble burst and oil price crashes. Despite the declines, Vistra and Constellation still hold high price-to-earnings ratios within the S&P 500 Utilities Index. Some investors view the dip as a chance to invest in energy stocks, which are seen as vital regardless of which AI model or tech company prevails.
Key takeaways:
DeepSeek's impact extended beyond technology stocks, affecting energy companies crucial to AI infrastructure.
Vistra Corp. and Constellation Energy Corp. experienced significant stock declines, raising concerns about their valuations.
Analysts compare the current situation to past market disruptions, emphasizing the volatility of relying on narratives.
Some investors view the dip in power producers as a buying opportunity, citing the essential nature of energy.
