AI data center stocks drop as Democrats sweep U.S. midterms

Investing.com - Democrats swept the U.S. midterm elections, sparking a selloff in artificial intelligence data center stocks. Investors are bracing for tighter regulatory oversight, potential rollbacks of tech tax incentives, and heightened antitrust scrutiny, which could slow down the rapid expansion of AI infrastructure.

"Assuming a more restrictive data center development environment, this could create incrementally more negative sentiment for AI infrastructure exposed names," Evercore ISI analysts led by Amit Daryanani said in a note.

Several democratic governor-elects have already discussed support for increased AI regulation. Most-sensitive stocks, namely CoreWeave, fell as neocloud stocks bore the sharpest losses following a Democratic sweep of both chambers of Congress in Tuesday's midterm elections. CoreWeave fell as much as 3.2% in premarket trading. Applied Digital fell 3%, while Nebius dropped 1.3%.

"We think the initial reaction will be to sell AI names though the question will be how much does this alter fundamentals and will other factors (inflation, yields) become offsets over time," Daryanani added.

Oracle, which priced a combined $20 billion stock and debt offering in recent sessions, was down about 1.2%, reversing part of Tuesday's 5.85% gain.

Democrats captured majorities in both the Senate and House, flipping traditionally Republican-leaning states including Texas and Kansas, setting up potential legislative friction for the remainder of President Trump's term.

The political shift injected a federal regulatory dimension on top of structural headwinds that were already building: in Q2 2026, at least 45 data center projects worth $68 billion were disrupted by local opposition, according to Data Center Watch.

Texas and Georgia, which together account for roughly a third of all AI data center spending and projects, both saw Democratic wins at the governor level.

The broader AI basket had already been deteriorating before Tuesday's vote. The Goldman Sachs Broad AI basket fell 15% in October and had declined more than 24% from its peak heading into Wednesday's session.

Any Democratic legislation would still require President Trump's signature to become law, a check that analysts note limits the near-term legislative risk. That constraint, however, does not fully neutralize executive branch regulatory action or the chilling effect on capital allocation that uncertainty alone can produce.

Original Article

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