Why We Sold GE Vernova Before The DeepSeek Drop
Saturday, Feb 1, 2025 10:50 pm ET
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Monday left growth investors reeling as China's DeepSeek shifted assumptions about the artificial intelligence landscape. Normally, you might think an alternative energy company like GE Vernova would be spared a hit to technology. But many power companies were seen as "AI adjacent" plays. The expected power requirements from semiconductors, data centers and all the infrastructure for AI computational power meant that even slowpoke utilities outpaced many growth names.

GE Vernova, the energy spin-off from General Electric, had benefited from the AI boom, surging 185% in 2024. However, the launch of DeepSeek, a more efficient AI model, raised concerns about the sustainability of relentless spending in the sector. This led to a wave of selling that swept through the market, with power, cooling, and data center giants taking significant hits.
The AI boom that fueled a historic rally in semiconductor and infrastructure stocks over the past two years came to a screeching halt Monday, as a wave of selling swept through the market following the launch of DeepSeek. While NVIDIA Corp. (NASDAQ:NVDA) grabbed the top of headlines for its $600 billion market-cap wipeout, power, cooling, and data center giants also saw single-day losses exceeding 20%.
In this context, the decision to sell GE Vernova before the DeepSeek drop was influenced by several specific factors that aligned with the investment philosophy emphasizing fundamentals and a long-term perspective. The investor had already achieved a 30% profit on GE Vernova in just three weeks, which was a significant gain. To protect this profit and avoid potential losses, the investor decided to sell the remaining position when the stock undercut the low of the prior two days. This move was in line with the philosophy of locking in gains and protecting profits.
Additionally, the stock had extended 25% from the 50-day moving average line, indicating that the stock had moved significantly from its average price, which could signal a potential reversal or correction. Selling the stock at this point helped to avoid a potential loss if the stock were to reverse.
Furthermore, the investor did not get greedy with the position, which helped to mitigate potential losses when AI-related stocks plunged on Jan. 27. By not holding onto the stock for the sake of chasing further gains, the investor was able to protect the profits already made.
The earnings performance of GE Vernova also contributed to the decision to sell the stock, aligning with the view that earnings are a primary driver of stock performance. The positive earnings reaction and the subsequent run-up in the stock price validated the view that earnings are a primary driver of stock performance. By selling at the peak, the trader was able to capitalize on the stock's earnings-driven momentum while minimizing the risk of a potential pullback.
In conclusion, the decision to sell GE Vernova before the DeepSeek drop was influenced by a combination of factors, including profit lock-in, extension from the 50-day moving average, avoiding greed, and the earnings performance of the company. These factors aligned with the investment philosophy emphasizing fundamentals and a long-term perspective, ultimately leading to a strategic move to lock in profits and protect against further losses in the AI sector.