A Chinese AI hotter than ChatGPT! DeepSeek's "energy efficiency bomb" shakes up the US stock energy sector

The Zhitong Finance APP noted that on Monday, stocks of American electricity, utility, and gas companies experienced one of the largest single-day declines on record, as new artificial intelligence technology launched by the Chinese startup DeepSeek raised doubts about the surge in expected electricity demand and technology spending in the U.S.

Last year, electricity producers were one of the best-performing sectors in the S&P 500 index, as the market anticipated that AI technologies from large tech companies would require energy-intensive data centers, thereby driving a surge in electricity demand. However, analysts and economists indicated that the widespread application of the AI model developed by DeepSeek (which the company claims was developed in less than two months and at a lower cost than models currently used by U.S. companies) could lead to a reduction in overall electricity demand, thereby decreasing the need for electricity facility construction.

Analysts at Evercore ISI stated in a report: "If DeepSeek's open-source model is indeed efficient, hyperscale data center developers could apply it to their models, leading to more moderate demand." Over the past year, large tech companies (also known as hyperscale data center developers) have invested billions of dollars in the development of AI data centers.

According to a report from the Lawrence Berkeley National Laboratory, in 2023, electricity consumption by data centers in the U.S. accounted for about 4.4% of the nation's total electricity usage, but it is expected to rise to between 6.7% and 12% by 2028.

Independent power supplier Constellation Energy (CEG.US) saw its stock price rise by about 100% in 2024, primarily due to its ability to sell nuclear and natural gas power to U.S. data centers. However, following the news of DeepSeek's technological advancements on Monday, its stock price fell by about 20%. Competitor Vistra (VST.US) dropped 30%, and Talen Energy Corp (TLN.US) fell 22%.

DeepSeek's AI technology may also threaten the dominance of current AI leaders in Silicon Valley and slow down the deployment of their data centers. On Monday, DeepSeek's AI assistant surpassed downloads of its U.S. competitor ChatGPT in the Apple App Store.

However, Ed Hirs, an energy economist at the University of Houston, stated that with the widespread application of AI, even with more energy-efficient models, electricity demand could still surge globally. He warned that the sell-off of electricity stocks could be shortsighted and temporary. Hirs said, "If DeepSeek does indeed become the desired technology and they sell it to U.S. companies, and U.S. companies adjust their algorithms to accommodate it, this would mean larger, faster, and more widespread development."

Nevertheless, electricity companies and even raw material producers related to power generation still face pressure. Earlier this month, Constellation acquired private natural gas producer Calpine Energy for $16.4 billion, marking one of the largest transactions in U.S. electricity industry history, indicating market expectations for increased demand for natural gas as a source of AI-generated power The stock prices of publicly listed natural gas producers in the United States have also declined, as natural gas is the largest component of the fuel used for electricity generation in the U.S. EQT Corp (EQT.US) fell by 9%. Midstream operator Energy Transfer (ET.US) stated that it has received connection requests from dozens of data centers, with its stock price dropping by about 7%