For the past year, one of Wall Street’s hottest trades has been betting on the energy boom fueled by artificial intelligence. Massive data centers—some consuming as much electricity as entire cities—have been expected to drive soaring demand for natural gas, oil, and electricity. Investors rushed to pile into stocks tied to energy infrastructure, convinced that AI would supercharge the industry for years to come. 

Then, last Monday, everything changed. 

A Chinese AI upstart called DeepSeek claimed it had trained a highly sophisticated AI model far more efficiently than its rivals. That single revelation was enough to rattle the markets, sending shares of natural gas producers, pipeline operators, and power plant owners into a steep selloff. Traders, fearing a potential shift in AI’s energy consumption needs, dumped stocks in a frenzy. 

The impact was swift and widespread. The market downturn spread to natural gas, pushing down prices for the heating and power-generation fuel to be delivered as far out into the future as 2028. This downturn highlights how the ripple effects of the AI boom have stretched beyond chipmakers and tech giants to industries typically unrelated to high-growth tech stocks, such as oil, gas, and utilities. AI-driven data centers are known for their massive power consumption, with electricity demands comparable to those of major U.S. cities. 

The shares of major gas producers EQT and Antero Resources tumbled more than 9%. Pipeline giants Kinder Morgan and Williams Cos. slid 9.3% and 8.4%, respectively. 

Texas Pacific Land surged last year on hopes that cheap Permian Basin gas would lure data centers, but on Monday, it fell 7.7%, while LandBridge tumbled 17%. 

The shock rippled through other energy markets as well. Two major exchange-traded funds filled with uranium mining stocks dropped 11%, while coal miner Peabody Energy slid 4.7%. Power companies, particularly independent producers selling electricity on the open market, saw some of the steepest declines. Nuclear plant owner Constellation Energy—one of last year’s best-performing S&P 500 stocks—fell 21%. Vistra, which operates one of the largest fleets of natural gas-fired power plants, dropped 28%. 

“They’re selling first and asking questions later,” said Jay Woods, chief global strategist at Freedom Capital Markets. “People have been looking for an AI theme buster for a long time.” 

The Uncertainty Ahead 

Despite Monday’s chaos, some analysts believe it’s too soon to tell whether DeepSeek’s efficiency claims will reshape AI’s energy consumption. While a more power-efficient AI model could reduce the strain on electricity grids, lower costs might also encourage wider adoption—potentially offsetting any energy savings. 

“This is really the first speed bump,” said Tim Winter, a Gabelli Funds portfolio manager specialising in power and utility stocks. “Maybe it’s just not going to be a straight-line climb forever.” 

Some investors scrambled to reposition their portfolios, moving away from speculative power producers and into the relative safety of regulated utilities. American Electric Power and WEC Energy Group saw modest gains of 4.5% and 2.9%, as investors sought stability while maintaining exposure to electricity demand growth. 

Even with the uncertainty, the broad consensus remains: AI will continue to require massive power. Utilities are already planning new gas-fired power plants, and a potential Trump administration could cut regulatory red tape to speed up construction. Tech giants like Microsoft are exploring nuclear energy options, and a major U.K. power producer is scouting locations in the U.S. South for biomass plants that could burn pine from shuttered paper mills. 

What’s Next? 

For now, all eyes are on how industry giants react. Investors are eagerly awaiting earnings calls from Meta and Microsoft this week to see if they acknowledge DeepSeek’s claims or double down on their own AI-driven power needs. 

“Now you’re telling me we’re not going to be straining the grid anymore?” Woods said. “I need to see more proof.” 

One thing is sure: the AI energy trade isn’t going away anytime soon. But Monday’s shakeup was a stark reminder that nothing is guaranteed, even in a red-hot market.