By Avi Salzman and Mackenzie Tatananni

The rise of DeepSeek, the Chinese artificial-intelligence company, is poking a hole in one of the most pervasive narratives about AI: that it will need enormous amounts of energy to run.

An AI chatbot developed by China's DeepSeek rose to the top of the Apple App Store on Monday, surpassing ChatGPT. DeepSeek said it can operate with much less computing power than the megalith data centers that big American tech companies are building.

The news triggered a broad selloff in tech stocks that also hit the stocks of companies that are expected to provide all of that power for the data centers owned by American tech companies.

That includes independent power producers like Constellation Energy, Talen Energy, and Vistra. All three of those stocks plunged on Monday, with Constellation dropping 19%, Talen falling 15%, and Vistra dropping 21%. The three companies own nuclear reactors and natural gas power plants whose value has been rising as tech companies look to hook into sources of large power loads.

Several other companies that produce electricity were tanking too. Oklo, a startup that makes nuclear reactors, was down 21%. Cameco, which produces uranium, was off 13%.

Natural gas stocks were falling too. Several tech companies are relying on natural gas plants to power their data centers. EQT, one of the largest producers of natural gas, fell 7.3%. Natural gas turbine-maker GE Vernova fell 18%.

Some infrastructure companies also fell. Vertiv, which says it offers cooling solutions that "solve the complex challenges arising from the AI revolution," was down 24%.

DeepSeek may not unseat the big American artificial-intelligence models. But Monday's selloff could raise persistent doubts about the stocks of these energy names. If more efficient models are possible, this means data centers won't need to consume as much power, spelling trouble for some of the biggest winners of the AI boom.

Write to Avi Salzman at avi.salzman@barrons.com and Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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January 27, 2025 10:45 ET (15:45 GMT)

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