From Yahoo Finance, January 27:
AI-exposed power stocks were swept away with tech's sell-off Monday as advances in AI made by Chinese start-up DeepSeek raised questions over AI spending levels at US companies and their dominance of the market.
Constellation Energy (CEG), the largest nuclear plant operator in the US, tumbled a record 17% while electricity generator Vistra Corp (VST) dropped 21%. Power equipment maker and servicer GE Vernova (GEV) declined 17%. Even nuclear power startup Oklo (OKLO) tanked 21%.
DeepSeek, a Chinese AI startup, released a new AI model on Jan. 20 that is viewed as competitive with the chatbots of OpenAI and other US tech companies. It was also cheaper to make, requiring fewer AI chips than the models of bigger players.
Big Tech’s insatiable energy requirements for data centers sent power stocks soaring in 2024 and into this year, with Goldman Sachs estimating power demand will grow 160% by 2030.
Last year Constellation announced a nuclear power deal with software giant Microsoft to revive a unit at Three Mile Island in Pennsylvania. In December, social media giant Meta (META) released a request for proposals from nuclear energy developers to help meet the company's AI needs.
Constellation, Vistra, and GE Vernova all hit new records just last week after President Donald Trump announced a new $500 billion project — backed by SoftBank (SFTBY), Oracle (ORCL), and OpenAI.
Wall Street analysts pushed back against the market reaction on Monday.
"I don't think DeepSeek is doomsday for AI infrastructure," Stacy Rasgon, Bernstein managing director and senior analyst told Yahoo Finance on Monday.
"The models they [DeepSeek] built are fantastic, they really are and they've pulled a number of levers on efficiency, but what they're doing is not miraculous either, or unknown to other top AI researchers or AI labs that are out there," he added....
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Referring back to the introduction to this morning's "GE Vernova hit with downgrade by Guggenheim (GEV)":
And though it is based on valuation rather than corporate or macro events the downgrade is, unfortunately, from Guggenheim who have been very timely in their calls.
See for example December 5's "GE Vernova shares see 33% target hike from Guggenheim, Buy rating upheld"
In pre-market action the stock is down $57.49 (13.67%) to $363.00.
The other "quality" name we have been touting, electric infrastructure contractor Quanta Services is down $28.01 (7.82%) at $330.02.
It is days like today that are the reason we prefer quality over super-spec lottery tickets: the good ones come back (eventually) the rest may, or may not.
The small modular nuke wannabes OKLO; SMR and the quantum computing stocks, RGTI, QBTS etc. are among the lottery tickets that may or may not come back.
Quanta and GE Vernova will survive and thrive. Even without AI. The U.S. and the world need to string more powerlines and need more generating capacity that will come on line faster than nukes or a baby nukes.
