High-flying utility stocks such as Vistra Corp. (VST), Constellation Energy (CEG) and GE Vernova (GEV) are down 20% or more as investors abandon the artificial intelligence (AI) trade.
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Stocks of U.S. electricity providers were among the best-performing securities over the past 18 months as demand from data centers that power AI models and applications was set to soar. However, those stocks are now among the hardest hit as investors reevaluate the outlook for AI and the money being spent to develop the technology.
VST stock is down 24% on the day as investors rotate capital away from securities that have been heavily associated with AI. CEG stock and GEV stock are each down 20% on the day. Other stocks associated with electricity and utilities are also down sharply, with Comfort USA (FIX) having fallen 21%. It’s a sharp reversal for the group. Even with today’s steep decline, VST stock is up 263% over the past year.
China’s Competitive Threat
The selloff has been prompted by news that Chinese AI start-up DeepSeek launched a free, open-source large-language model, claiming it was developed in two months at a cost of $6 million. The small expense involved in launching DeepSeek has investors worried about the billions of dollars being spent by American technology companies to develop similar AI models.
In a note to clients, analysts at Citigroup (C) said that DeepSeek’s large-language model had “prompted investor inquiries around cost of compute.” However, analysts at Wall Street investment firm Bernstein doubted that DeepSeek was actually built for the purported $6 million and said that the market reaction today (Jan. 27) is “overblown.”
Is VST Stock a Buy?
The stock of Vistra Corp. has a consensus Strong Buy rating among seven Wall Street analysts. That rating id based on seven Buy recommendations issued in the last three months. The average VST price target of $186.43 implies 30% upside from current levels.
