AI Stocks Volatile After DeepSeek Sell-Off: What Investors Need

AI stocks are facing turbulence after the DeepSeek panic sell-off, impacting key players. Investors are weighing whether this presents new opportunities amid anticipated earnings growth across several sectors.

Date: 01-02-2025

AI Rating: 6

Overview of AI Stock Performance
After the panic caused by DeepSeek, a Chinese AI startup, several infrastructure AI stocks faced significant declines in their market value. Companies like Eaton Corp. (ETN), Sterling Infrastructure (STRL), Super Micro Computer (SMCI), Constellation Energy (CEG), and NVIDIA (NVDA) are experiencing fluctuations in stock performance due to this shock.

Earnings Insights
The report highlighted various expected earnings growth rates for the companies involved:
- Eaton Corp. is projected to see an 11.5% increase in earnings for 2025.
- Sterling Infrastructure forecasts 24% earnings growth in 2024 and an additional 8% in 2025.
- Super Micro Computer's earnings are expected to jump by 43% in 2025.
- Constellation Energy anticipates a notable rise of 68.2% in 2024, followed by a 10.5% rise in 2025.
- NVIDIA expects a staggering 126.2% growth in earnings in the upcoming fiscal year due to sustained demand for AI chips.

The ability of these companies to rebound from the recent dips will heavily depend on the realization of these growth projections. Investors may interpret these expected increases as a strong sign for potential rebounds in stock values, particularly in a volatile market.

Market Reactions and P/E Ratios
Following the panic sell-off, stock prices for the mentioned companies dropped significantly:
- Eaton may represent a potential buying opportunity, especially as it trades at a forward P/E ratio of 26.4, which is higher than typical value stock levels.
- Sterling is down by 25.3%, and trades with a forward P/E of 21.8.
- Super Micro, which has seen a 15.9% drop, has a P/E of just 8.8, positioning it as a budget-friendly alternative among AI-related stocks.
- The sharp 11.1% decline for Constellation Energy places it at a P/E of 31.4, while NVIDIA, facing a 15.5% drop, now trades at a P/E of 42, down from a higher level before the sell-off.

In summary, while the recent sell-off may have created buying opportunities for some investors, the forthcoming earnings reports will be critical in determining the viability of investments in these companies going forward.

Stocks: ETN STRL SMCI CEG NVDA