Investing.com -- Energy sector stocks including Oklo (NYSE: OKLO), GE Vernova (NYSE: GEV), Vertiv (NYSE: VRT), Eaton Corporation (NYSE: NYSE:ETN), Amphenol (NYSE: NYSE:APH), NuScale Power Corporation (NYSE: SMR), and Constellation Energy (NASDAQ:CEG) Group, Inc. (NASDAQ: CEG) experienced significant declines in the trading session, with drops ranging from 8% to 18%. The downturn is attributed to concerns about DeepSeek's energy efficiency impacting the AI sector's demand for high-tech chips.
The market reaction was swift and broad, with Nasdaq futures falling over 3.5% and S&P 500 futures tumbling over 2%. Leading AI chipmaker Nvidia (NASDAQ:NVDA) saw an 12% slide, while other tech giants like Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:META), and Alphabet (NASDAQ:GOOGL) also faced declines in premarket trading. European tech stocks and Asian markets, including Japan's Nikkei, were not spared from the selloff, highlighting a global reassessment of tech valuations.
Analysts have weighed in on the implications of DeepSeek's breakthrough. Bloomberg Intelligence analyst Mustafa Okur commented on the immediate market impact, stating, "Vertiv, GE Vernova, Eaton, Amphenol and TE Connectivity (NYSE:TEL)'s share-price declines reflect fears of lower demand after China's frontier large language model (LLM), DeepSeek, was trained using a fraction of the GPUs compared to US LLMs." This sentiment reflects a broader concern that the need for intensive AI infrastructure may not be as strong as previously anticipated.
Despite the short-term market reaction, some industry experts see potential long-term benefits. If DeepSeek's claims are substantiated, AI could become cheaper to implement, potentially expanding its use and driving demand for AI-related products and applications. However, the immediate effect has been a recalibration of expectations for companies involved in the AI supply chain.
The steep declines in energy stocks underscore the sensitivity of the sector to technological advancements and market perceptions. As the details of DeepSeek's model and its implications for the AI industry continue to unfold, investors are recalibrating their positions in anticipation of shifting demand dynamics.
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