There is a big upset in the world of Artificial Intelligence (AI). After the launch of China’s new AI model Deepsek, not only technology stocks, but also energy stocks have seen a major decline. Why is this happening? The brilliant rise in the stock market in the last 2 years, it was led by 7 largest American tech companies like Nvidia. These companies are also known as ‘Magnificent Seven’. The boom related to Artificial Intelligence (AI) also started in these American companies and investors from all over the world were betting on these companies to ride on the wave. Due to this, their valuation started touching the sky. However, now China has given a huge blow to these ‘magnificent intake’ to launch the AI model, Deepsek, a low cost and energy consumption.
The shares of veteran IT companies like Nvidia declined by 17 per cent and decreased hundreds of billion dollars in the market value. The launch of Deepsek saw a strong decline in shares not only IT and semiconductor, but also in power and energy sectors.
Why was the launch of Deepsek sold in power shares?
Let us tell you that AI models need a lot of electricity to work properly. For example, Chatgpt requires about 10 times more energy than Google search for a search request. Data centers are the largest electricity customers to date and they require electricity for four hours, seven days.
Analysts say that as the use of AI increases, the demand for electricity to keep these data centers running will also increase manifold. According to a Barclaylage report, in today’s time, about 3.5 percent of the US power consumption is spent on data centers and by 2030 the figure is expected to increase to 9 percent.
According to a report by Goldman Sachs, data centers worldwide currently consume about 1-2 percent of the total electricity, but by 2030 the percentage will probably increase by 3-4 percent. To fulfill this demand for electricity, more electricity will be required than the power generation is being generated right now. Therefore rapid grid expansion and increased capacity will be required.
Therefore, the energy sector investors were betting on options such as renewable energy and nuclear power. But Deepsek has changed this equation. This new AI model is not only better than its rivals, but it also reduces power consumption compared to the rest. This means that the need for energy for data using was thought now, now it can be less than that.
Due to this, S&P Energy Index has fallen by 3% for the last three days. In India too, the Nifty Energy Index has fallen 7%. Shares like CG Power, Hitachi Energy and Power Grid have seen the most decline.
“Although analysts believe that the growth of data centers will definitely increase the demand for energy, but now it will not be as much as the market expected. Deepsek has changed the picture of the energy sector, but the increasing use of AI Energy can increase demand in future. “
In a note by Morningstar, “We still believe that the development of the data center will increase the demand for electricity, but not as much as the market expected.” Barclays has also hoped to increase the demand for electricity with the increasing use of AI, but said that this demand may be less than earlier estimates.
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