Here's Why Vistra Stock Sold Off in February (Hint: It's AI Related)

Shares in retail electricity and power generation company Vistra (NYSE: VST) declined by 20.5% in February, according to data provided by S&P Global Market Intelligence. A decline of that magnitude is never welcome. Still, long-term investors in Vistra won't be too upset as the stock is up 464% over the last three years and 123% over the last year, including the decline in February.

Vistra, AI, and nuclear power

The stock price fall coincides with a decline in other power-related companies deemed to be plays on artificial intelligence (AI), such as Constellation Energy (down 16.5% over the same period) and NuScale Power (down 27.9%).

Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »

Vistra has become one of the favored plays on the theme thanks to its growing capacity in nuclear power. The company started 2024 with 2,400 megawatts (MW) of its 36,702 MW of total net generating capacity in nuclear and ended the year with 6,448 MW of its total 40,657 MW in nuclear.

The significant increase in nuclear capability came down to its acquisition of Energy Harbor in March. Investors have warmed to nuclear energy as the major cloud service providers, Microsoft (Azure), Alphabet (Google Cloud), and Amazon (Amazon Web Services), all inked deals to procure power from nuclear sources to power their data centers.

Why was Vistra stock sold off in February?

As such, Vistra's price movement needs to be put into the context of a sell-off by investors looking to take profit after a strong run-up in stocks exposed to the theme. The catalyst for the sell-off was the news, in late January, of Chinese start-up DeepSeek's launch of its latest artificial intelligence model.

The market fears that DeepSeek's model may cost a fraction of U.S. models, leading to less demand for power to run data centers than previously anticipated. Valuations for growth stocks often rely on long-term growth assumptions, so all it will take is a slight tweak in long-term growth estimates to significantly lower estimated valuations and price targets.

Image source: Getty Images.

Is the sell-off justified?

The DeepSeek news is not necessarily bad. If AI adoption increases, then it's likely to be a net positive as it will accelerate the growth of AI demand overall. Moreover, Vistra hasn't announced a major deal with a cloud service provider yet, so there's still plenty of upside potential from a deal in the future, particularly if that deal is done with power priced above the current market rate.

Should you invest $1,000 in Vistra right now?

Before you buy stock in Vistra, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vistra wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $710,848!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of March 3, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool recommends Constellation Energy and NuScale Power and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.