By james art :max_bytes(150000):strip_icc()/GettyImages-2192400361-f95866cd8c124a91b0568d020e879ddf.jpg?w=1200&resize=1200,0&ssl=1 "Why These AI Power Stocks Plunged on Monday – Investopedia")
Key takeovers
- Nuclear providers Vistra and Constellation Energy were the worst-performing stocks in the S&P 500 on Monday, as investors questioned whether AI will require the massive amounts of computing power and electricity it’s expected to.
- An AI model from Chinese startup DeepSeek was found to be exposed almost as well as models from US leaders such as Openai and Google at a fraction of the cost.
- DeepSeek’s success could force the US AI industry to focus on improving efficiency, threatening to halt the surge in energy demand that has driven nuclear stocks to record highs over the past year.
Shares of nuclear power suppliers tumbled on Monday as markets reacted to the success of a Chinese startup’s AI model that challenges the performance of state-of-the-art American models but requires a fraction of the computing power.
Vistra ( VST ) was the worst-performing stock in the S&P 500 in afternoon trade, as its shares tumbled nearly 30%. Competitor Constellation Energy Corp. ( CEG ) also fell more than 20%, making it the second-worst stock in the index.
Both companies’ share prices have risen over the past year on the back of AI targeting electricity demand. Tech giants like Microsoft (MSFT) and Amazon (AMZN), desperate to develop the most powerful AI models, have turned to nuclear as a carbon-free power source for their data centers. Last year, Microsoft struck a deal with Constellation to restart one generator at the infamous Pennsylvania nuclear facility. And Amazon is investing in developing small modular reactors to power its data centers.
The growing popularity of Chinese startup DeepSeek’s latest open-source AI model has fueled concern on Wall Street that cutting-edge AI may not need as much computing power as expected. DeepSeek’s AI model is said to run at just one-tenth the cost of leading US models, such as Meta’s (Meta) Llama.
Jefferies analysts wrote on Monday that DeepSeek’s success could force the U.S. AI industry to “refocus on efficiency and return on investment, meaning lower demand for computing power by 2026.” That, they said, could put U.S. executives “under greater pressure to justify increasing AI Capex”, raising the prospect that rising electricity demand could pay off sharply.
Those doubts have spooked investors in utility stocks like Vistra and Constellation Energy, both of which have doubled in value over the past year and depend on the AI Boom for their rich valuations.