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Shares of U.S. power, utility, and natural gas companies plummeted Monday in a historic sell-off. The decline followed news of DeepSeek, a Chinese AI start-up, unveiling advanced, cost-efficient technology that challenges projections for soaring U.S. electricity demand.
Last year, power producers benefited from expectations of skyrocketing demand fueled by AI-driven data centers. However, DeepSeek's open-source model, reportedly built in under two months and more energy-efficient than current U.S. models, has raised concerns among analysts about moderated electricity requirements. Evercore ISI noted that if Big Tech adopts DeepSeek's methods, growth in power demand could slow.
Data centers consumed approximately 4.4% of U.S. electricity in 2023, with estimates projecting a rise to as much as 12% by 2028, according to the Lawrence Berkeley National Laboratory. Constellation Energy, which surged in 2024 due to its ability to supply nuclear and gas-fired power to data centers, saw its shares plunge 20% after the DeepSeek news. Rivals Vistra and Talen Energy dropped 30% and 22%, respectively.
Natural gas producers also felt the impact, with EQT Corp falling 9% and Energy Transfer losing 7%. Constellation's recent $16.4 billion acquisition of Calpine Energy underscores industry optimism about growing gas demand for AI, now facing uncertainty.
Despite concerns, energy economist Ed Hirs highlighted that wider AI adoption could still drive power demand. He argued the sell-off might be short-lived, especially if DeepSeek’s efficiencies lead to accelerated AI development in the U.S.
DeepSeek's AI has already surpassed U.S.-based ChatGPT in downloads, signaling a potential shift in the competitive landscape. While immediate effects weigh on energy stocks, long-term implications remain uncertain.
