Key Takeaways
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- A UBS “AI power demand” basket fell 12% in five sessions, worst drop since February.
- Oklo plunged 30% and Vistra 12%, reflecting doubts about extreme grid buildout assumptions.
- Research showing lower compute power needs and cautious comments from GE Vernova cooled expectations.
- Select power-equipment names like Vertiv and Amphenol still hitting record highs, signaling targeted rotation rather than broad unwind.
What Happened?
After months of runaway enthusiasm for electrification plays, power generators and nuclear upstarts saw sharp pullbacks. Investors reacted to signals that the AI compute boom may not require as much new capacity as Wall Street expected. Questions about revenue visibility for companies like Oklo, and guidance from GE Vernova suggesting moderated spending, added pressure. The profit-taking follows major gains year-to-date, including an eightfold surge for Oklo through mid-October.
Why It Matters?
AI infrastructure winners have been priced for aggressive, sustained power shortages and rapid grid expansion. Any perceived reduction in demand growth can compress valuations quickly. The sector’s volatility echoes past tech-adjacent infrastructure cycles, such as the dot-com fiber buildout that led to overcapacity and investor losses. Still, policy support continues: the U.S. is accelerating data center-to-grid connection approvals and financing pipelines remain large, including a record bond deal by Oracle for data center investment.
What’s Next?
Earnings from Eaton, Vistra, and Constellation will test whether fundamentals justify elevated multiples. Watch capital-spending guidance from hyperscalers and grid operators for confirmation of structural power demand. If AI efficiencies improve faster than expected, upside for some generators could compress. Selective allocation—favoring firms with diversified revenue or equipment leverage—remains the prevailing investor stance as risk appetite cools.
