By Owen Tucker-Smith

Energy stocks that have boomed thanks to the rapid development of artificial intelligence plunged on Monday as Chinese AI lab DeepSeek roiled markets by saying it trained successful models much more efficiently than its competitors.

Constellation Energy, the biggest U.S. producer of nuclear power, dropped 17% in late morning trading Monday. Nuclear-heavy power company Vistra Energy, Nano Nuclear Energy and Vertiv Holdings--which provides cooling and energy management for data centers--each lost about a fifth of their market value, as did power-turbine maker GE Vernova.

The energy-company losses came as shares of Nvidia fell 12%, dragging down the tech-heavy Nasdaq Composite.

In recent months a string of deals between big AI-developing companies and energy producers had buoyed the sector, particularly generators of moribund nuclear power. Among the deals, Constellation and Microsoft in September announced a power-purchase agreement paving the way for the restart of the Three Mile Island nuclear plant.

Constellation shares had more than doubled over the past year, and Vistra shares had nearly quadrupled over the same period.

Guggenheim analyst Joseph Osha said investors had gotten "a little over their skis" as the stocks gained, adding the fundamental value of energy companies in the U.S. hadn't shifted.

"There was certainly an element of (power) load growth that was going to be driven by data centers, but it was far from the only element driving load growth in this country," Osha said, adding factors like reindustrialization and economic decoupling from China also are fuelling rising energy demand.

Write to Owen Tucker-Smith at owen.tucker-smith@wsj.com

(END) Dow Jones Newswires

January 27, 2025 11:37 ET (16:37 GMT)

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