Updated: 1 - As Democrats achieve a sweeping victory, casting a shadow over expansion plans, stocks of artificial intelligence and data centers decline

Added investor comments in paragraphs 6 to 7 and embedded a chart

Niket Nishant

Reuters, November 5 - In premarket trading on Thursday, stocks related to artificial intelligence and data centers declined, as the Democratic Party achieved a sweeping victory in the U.S. midterm elections (link), sparking concerns that the sector’s rapid expansion may face obstacles.

Serving as a barometer of investor concern over massive AI spending, new tech stocks declined, with CoreWeave CRWV.O and Nebius NBIS.O both down about 4%.

Investors worry that a Congress controlled by Democrats could subject the data center industry to stricter scrutiny, potentially slowing growth at a time when public opposition to new facilities is already increasing.

UBS analysts estimate that about 30% of the new U.S. data center capacity expected by 2028 may be at risk due to possible construction halts, highlighting the industry’s threats—the sector’s growth depends on rapid construction of new facilities.

Political uncertainty has added pressure to the entire AI sector, as investors increasingly question whether massive capital expenditures needed to build AI infrastructure will yield sufficient returns.

“The market is shifting focus from the potential of AI to the cost of AI,” said Incline Investment Management founder and CEO Ted Parkhill.

“There’s no doubt that, in the long run, artificial intelligence will transform the world. But that doesn’t mean the current valuations of every AI-related stock are justified. The market will experience major upheavals in the future.”

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Data center operators Applied Digital (APLD.O), Cipher Digital (CIFR.O) and IREN (IREN.O) all fell about 4%.

The downtrend also spread to utilities and equipment providers affected by data center construction. GE Vernova (GEV.N) lost 1.2%, while Constellation Energy (CEG.O) fell 0.7%.

Large-cap tech companies rose against the trend as investors bet that slower data center building might curb AI spending by tech giants and boost the value of existing facilities.

Amazon.com AMZN.O, Alphabet GOOGL.O and Meta META.O all rose nearly 1 %, while Microsoft MSFT.O was largely flat.

On the other hand, Qualcomm (QCOM.O) plunged 9%, as its quarterly (link) smartphone chip sales missed Wall Street’s expectations. Chipmakers NVIDIA (NVDA.O), Intel (INTC.O), and Broadcom (AVGO.O) all dropped 1.5% to 2.2%.

(To assist non-English speakers, Reuters has automatically translated its reports into several other languages. As automated translation may contain errors or lack necessary context, Reuters does not guarantee the accuracy of these translations and provides them only for readers’ convenience. Reuters assumes no responsibility for any damage or loss arising from the use of the automated translation feature.)