Constellation Energy, Vistra Corp., and GE Vernova saw significant declines in premarket trading, with Constellation and Vistra tumbling over 14% and GE Vernova sliding nearly 16%. This downturn coincided with the debut of China's DeepSeek AI lab, which introduced an AI model touted as cheaper and more efficient than its U.S. counterparts. The unveiling of DeepSeek has led investors to reassess the energy consumption requirements of artificial intelligence applications.
Power companies heavily invested in the tech sector’s data center expansion faced substantial losses early Monday. Constellation Energy and Vistra Corp., among others, experienced sharp drops in their stock prices. These companies had previously been leading the S&P 500, driven by investor speculation that AI data centers would significantly increase electricity demand.
DeepSeek's emergence as an open-source laboratory has added a new dimension to the conversation around energy consumption in AI technology. As a result, investors are questioning the actual energy needs of AI applications, impacting the valuations and perceived growth potential of energy firms tied to the tech sector. Talen Energy, another affected player, saw its value decrease by more than 8% during trading.
Constellation Energy has been at the forefront of this trend, having signed a power agreement with Microsoft to restart the Three Mile Island nuclear plant near Harrisburg, Pennsylvania. Meanwhile, Talen Energy is supplying electricity from the Susquehanna nuclear plant to power an Amazon data center. GE Vernova has soared this year, benefiting from market optimism around its gas and electric grid businesses' potential gains from AI-driven energy demands.
Despite not yet securing a data center deal, Vistra is viewed positively by investors due to its nuclear and natural gas assets. The tech sector's substantial investments in data centers highlight the strategic importance of energy companies in supporting this digital infrastructure. However, the exact financial commitment remains unspecified in available reports.