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Power providers’ stock performance over the past year has mirrored the industry they were drafting on.

The S&P Utility Index climbed 20% in 2024, with names like Vistra and Constellation Energy soaring far more. In fact, Vistra, which owns both power generation and retail electricity operations, rose 258% last year, topping Nvidia.

That increase was predicated on the idea that these typically snoozy companies would see a sea change in growth based on demand for power for AI data centers. One catalyst was Microsoft’s commitment to Constellation Energy last year to buy power at far above-market rates from a restarted Three Mile Island nuclear reactor.

The stock surge has been quite a shift for a sector that investors usually favor for its stability and dividend payouts. For some longtime analysts, it has meant utility stocks have gotten ahead of themselves.

“This is what happens when tourists invade a value space and they just push these stocks up to huge valuations,” Anthony Crowdell, who covers the sector for Mizuho, told Yahoo Finance in an interview. He emphasized that while there’s speculation of further Microsoft-style deals, it is so far the only one.

And then DeepSeek’s R1 release brought the momentum to a screeching halt after it triggered questions about whether generative AI training and inference can happen more efficiently, meaning less power will be needed. The lofty valuations made for long falls — Constellation opened Monday around 20% down from Friday’s close.

With the tech sector, investors have become accustomed to big growth and big valuations, as well as the volatility that can sometimes accompany shifting expectations. While some have argued that AI will revolutionize how people live and work and predict more growth for megacap tech stocks, it’s more of a continuation of their existing business than a fundamental reworking.

Contrast that with utilities, a classic value sector (that is, lower growth and lower price-to-earnings ratio) that has been trading like growth.

Some analysts still see it that way.

“We believe that this sell-off was an overreaction to this news, and data center demand is likely to continue over the intermediate term,” Bank of America analysts led by Ross Fowler wrote in a note to clients this week. Still, they acknowledged, “The longer term has a lower probability of the mega growth bull case, and there is a slightly higher downside risk to efficiency gains sooner than we anticipate.”

The so-called hyperscalers — giants like Alphabet, Microsoft, and Amazon — haven’t indicated they’re slowing down their data center buildouts. Indeed, on Microsoft’s earnings call, CFO Amy Hood said the company’s constraints on this front have been “power and space.”

That brought the “tourists” flooding back to utility shares on Thursday. A longer stay might depend on whether tech giants’ spending plans convert to actual agreements with utilities.

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