Many big tech companies are surging Wednesday after Democrats won dramatic midterm elections and flipped both houses of Congress.
During Wednesday trading, Amazon soared 8%, Google rose more than 6%, Microsoft rose 4%, Meta rose 3% and Apple, which faced President Trump’s tariffs and recently received refunds, rose nearly 7%.
JPMorgan Asset Management chief global strategist David Kelley said on “Squawk on the Street” that Tuesday’s results removed market uncertainty.
Divided government, he said, “leads to less growth, less inflation, less uncertainty. I think that’s what’s driving the stock market up today.”
However, some stocks fell on Wednesday, particularly those related to President Trump’s advisor Elon Musk and AI data center expansion.
When the results were announced last night, some observers saw it as bad news for big tech companies that had bet on building massive AI-focused data centers. On Tuesday, there were 41 local ballots asking whether to limit or clear the way for AI data centers, and voters opposed data centers in 40 of them. In a CNBC Voter Poll, 56% of voters said data centers were an important or primary factor in their voting decision.
Analysts said Democrats who have proposed moratoriums on data centers won gubernatorial races in Texas, Georgia and Ohio, raising concerns that the projects would run into regulations or be blocked by politicians.
“Remember that back-up power emissions, zoning, water, interconnection/grid and tax considerations are often overseen by state regulators,” Macquarie analyst Paul Golding said in a note on Wednesday.
Tesla shares fell 2% and SpaceX fell 3%. Nvidia, which makes the chips for most of these AI data center projects, fell more than 1%.
Many of the technology stocks that rose on Wednesday were so-called hyperscalers, the largest cloud providers that combine huge capital expenditures with strong free cash flow and have the most experience and capabilities in building AI data centers.
“We believe high regulatory barriers lock in incumbents and increase risk (and raise required ROIC) for new entrants,” Needham analyst Laura Martin said in a note Wednesday. “Hyperscalers are AI incumbents.”
A small AI cloud provider, often referred to as Neocloud, took a hit Wednesday. Coreweave stock fell 10%. Baird analysts said in a note that the election results are creating “sentiment headwinds” for neo-crowd.
Macquarie analyst Golding remains bullish on AI infrastructure, writing that well-capitalized, high-quality operators stand to benefit most if projects stall in some states.
“Neoclouds may pay more to lease powered shells (and pass on costs) for GPUaaS commitments, while hyperscaler/AI lab capacity needs may increase competition for even more limited supply,” Golding wrote.
Tuesday’s results could suggest limits on new data center development in some states, but do not necessarily signal a slowdown in construction nationwide, CEO Chris Miglino said. ax computingsaid in an email. Businesses are still raising capital, businesses are still spending, and more production capacity is still needed.
Milino said tighter regulations in some regions may cause investors and customers to consider different cloud computing providers more carefully, choosing those with the ability to provide capacity or those that offer AI inference for specific industry niches.
“If you already have power, have cash in place, and understand how to efficiently deploy and operate your computing infrastructure, you’re in a much stronger position than companies that are still trying to figure that out,” Mirino said.
