AI stocks tumble on data-center expansion fears after midterms | Magica
AI stocks tumble as data-center pauses threaten expansion plans
Editorial Team
••📖5 min read
Technology shares fell sharply as Democratic election victories raised fears of longer data-center construction pauses. Texas already had a temporary halt, and the incoming governors’ proposals leave unresolved how much expansion will be delayed and who will pay for the power it needs.
The Nasdaq Composite fell more than 5% in late-morning trading Thursday before recovering some ground by midday.
Data-center developers face possible construction pauses; the election result does not establish how much capacity will actually be delayed.
Texas already had a temporary halt; the election raises questions about the duration and conditions of restrictions.
A retreat in AI and data-center stocks became a broader technology rout on November 5 as investors assessed whether Democratic midterm victories would prolong restrictions on the infrastructure buildout supporting artificial intelligence. The immediate market reaction was clearer than the eventual policy outcome: shares fell while the scope, duration and implementation of incoming governors’ proposals remained unsettled.
November 5 premarket declines; CoreWeave and Nebius figures are approximate. This snapshot precedes the broader intraday selloff. Graphic: Magica. Source: Reuters via Devdiscourse.
From infrastructure weakness to a wider selloff
The tech-heavy Nasdaq Composite dropped more than 5% in late-morning trading before recovering somewhat by midday, according to the intraday account. It was moving toward a correction—a decline of at least 10% from a recent high—rather than a confirmed closing milestone. The Philadelphia Semiconductor Index was down more than 9% at midday.
The selling had begun before the market opened. CoreWeave and Nebius, infrastructure providers in the group known as neoclouds, were down about 4% each in a premarket report. Neoclouds build data centers and lease computing capacity to larger customers, including the giant technology companies known as hyperscalers. That business makes the availability of new facilities directly relevant to their expansion.
An earlier premarket version put CoreWeave’s decline at 1.6% and Nebius’ at 2.2%. These snapshots describe different points in a developing selloff.
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Editorial Team
Data-center operators Applied Digital, Cipher Digital and IREN also fell about 4% each in the later premarket report. Weakness reached equipment and electricity suppliers: GE Vernova declined 1.2% and Constellation Energy slipped 0.7%.
The later selling spread beyond the immediate construction chain. A separate market account recorded all 11 S&P 500 sectors in negative territory, with its information technology index down 6%.
Election concerns were not the only pressure. The intraday account also cited rising oil prices. Qualcomm's sharp premarket decline followed a miss in quarterly smartphone-chip sales, a separate earnings-related trigger. A broad selloff cannot establish how much of each stock's move came from prospective data-center policy.
The constraint is political—and physical
Democratic control of Congress raised investor concerns about tougher scrutiny of data-center development. More concrete proposals came from state election winners in Texas and Ohio, both areas of substantial development.
Texas Governor-elect Gina Hinojosa, a Democratic state lawmaker whose victory ended 32 years of Republican control of the governor’s office, promised a moratorium on new buildouts until lawmakers enact stronger protections. Ohio Governor-elect Amy Acton, a Democrat and physician who became prominent as the state’s health director during the COVID-19 pandemic, called for conditional pauses requiring developers to cover utility costs, provide community benefits and use union labor. Those proposals are described in the market report.
Outgoing Texas Governor Greg Abbott, a Republican, had already imposed a temporary halt tied to a state audit, according to a separate report.
The distinction matters: a conditional pause could change who pays for expansion and the terms on which it proceeds. It does not by itself establish a permanent prohibition. Nor does a congressional election result specify what restrictions state authorities will implement.
The electricity stakes predate this election. A December 2024 US Department of Energy announcement, drawing on research produced by Lawrence Berkeley National Laboratory and funded by the department, estimated US data-center electricity consumption at 176 terawatt-hours in 2023, up from 58 terawatt-hours in 2014—roughly a tripling. Data centers accounted for about 4.4% of national electricity use in 2023. The projected range for 2028 was 325–580 terawatt-hours, or approximately 6.7%–12% of US electricity use.
Those are projections for all data centers, not measured demand from AI alone. Their wide range nevertheless shows why electricity supply and the allocation of utility costs are consequential to the expansion debate.
Pauses are one response to that pressure. The department’s 2024 announcement also outlined ways to accommodate growth, including onsite generation and storage, reuse of retired coal-site infrastructure and new electricity rate structures intended to preserve affordability. Those were strategies, not evidence that power constraints had been resolved.
Historical estimates and the December 2024 projection for all US data centers, not AI alone. The 2028 bars are range endpoints, not additive quantities. Graphic: Magica. Source: US Department of Energy.
What would turn the risk into delayed capacity?
Analysts at UBS, the bank, estimated that potential construction pauses could put around 30% of expected US data-center capacity additions in 2028 at risk, according to the premarket report. That denominator is new capacity expected in one year—not the entire installed data-center fleet. The estimate describes exposure to possible pauses, not confirmed cancellations; the report does not provide enough methodological detail to convert it into a precise loss of computing supply.
There is also a competing financial effect. In the premarket snapshot, Amazon, Alphabet and Meta rose nearly 1% each while Microsoft was flat. The report attributed that resilience to bets that slower construction could restrain Big Tech's AI spending and increase the value of existing facilities. By the later session, large hyperscalers had also been caught in the decline.
That changing reaction leaves two questions unresolved: how much construction incoming governments will actually delay, and whether slower spending would improve investment returns or constrain the computing capacity customers need.
Both governors-elect take office in January. Acton will face a Republican-controlled General Assembly. Hinojosa’s legislative prospects also depend on the makeup of Texas’ Republican-dominated legislature, though she will have veto and appointment powers to influence state policy. Neither election report establishes the legal mechanism for imposing the proposed data-center restrictions.
The next evidence that matters is the wording and reach of new rules, the conditions for projects to resume, and changes to construction schedules. Those decisions will show whether the political shift primarily delays capacity or changes the costs and obligations developers must accept to build it.
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