DeepSeek Deep Sixes Energy Equities

Remember the AI boom for the energy sector? That's so last week.

Remember when Microsoft needed so much electricity for its AI data centres it was paying to re-open the controversial Three Mile Island nuclear plant in Pennsylvania? The company behind that deal, Constellation Energy, which when not in nuclear is big in natural gas, had been on a run - and that TMI anecdote was rocket fuel for the stock.

Constellation, along with a clutch of other US energy firms and utilities, had seen its valuation explode over the past year as the narrative cemented that AI/data centres were about to strain electricity supply. Other companies often mentioned in the same breath, such as Vistra and Talen, went on spectacular bull runs:

Source: Bloomberg

And despite the fact that Nvidia chips (with some alternatives) tend to be the biggest beneficiaries of the AI boom as they make up 60-80% of the cost for creating and training a Large Language Model like GPT-4 - some estimates put it at $600 million for that model - some 10-20% of the cost would be for electricity al…