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Chinese AI Company’s Open Source Platform Spurs Questions About Power Demand

Chinese artificial intelligence company DeepSeek’s open-source platform created shockwaves across stock markets at the start of the week, putting downward pressure on stock prices for a number of companies including U.S. energy companies and power producers that are increasingly focused on the growth of AI and data centers and related increases in power demand.

“The release of Chinese AI company DeepSeek’s open-source reasoning model R1 has raised questions about how much electricity will be required to power future data centers,” wrote Travis Miller, energy and utilities strategist for Morningstar, on Jan. 27.

He noted that stocks for Vistra, NRG Energy, and other power producers were down on Jan. 27, “based on speculation that open-source reasoning models will result in less energy demand growth.”

Miller said that R1 “illustrates the threat that computing efficiency gains pose to power generators. If higher data usage requires less energy than previously expected, it could have big ramifications for demand.”

He said that lower costs for large language models could increase demand for AI inference. In the near term, Morningstar expects Microsoft, Amazon, Alphabet – the parent company of Google -- and others to continue investing in data center expansion.

Stating a bottom line in his commentary, Miller said: “We still believe data centers, reshoring, and the electrification theme will remain a tailwind, but that market expectations went too far.”

With the proliferation of data centers proposed across the U.S., a number of utilities are making moves to restart mothballed nuclear power plants to help meet the anticipated power demand from data centers and AI.

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