Major technology companies saw significant gains on Wednesday following the Democratic Party's victory in the midterm elections, which flipped control of both the House and Senate. Shares of Amazon surged 8%, Google rose over 6%, Microsoft climbed 4%, Meta increased by 3%, and Apple gained nearly 7%. Analysts attributed the rally to reduced market uncertainty, with David Kelly of JPMorgan Asset Management noting that a divided government would likely lead to moderation in growth and inflation.
However, not all tech stocks benefited from the election results. Companies tied to Elon Musk, such as Tesla and SpaceX, saw declines of 2% and 3%, respectively. Nvidia, a key supplier of chips for AI data centers, slipped just over 1%. The election results raised concerns about regulatory hurdles for AI data center projects, as voters in 40 out of 41 local ballot measures opposed new data centers. Analysts warned that Democratic wins in key states like Texas, Georgia, and Ohio could lead to stricter regulations or blockages for these projects.
Hyperscalers, large cloud providers with significant capital expenditure and free cash flow, were seen as potential beneficiaries of increased regulatory barriers. Analysts suggested that these incumbents would face fewer risks compared to smaller AI cloud providers, known as neoclouds. CoreWeave, a neocloud, saw its stock fall 10%, while Baird analysts noted a sentiment headwind for these smaller players. Macquarie analyst Paul Golding remained bullish on AI infrastructure, suggesting that well-capitalized operators would benefit the most if projects slow down in some states.
Despite the potential for regional slowdowns in data center construction, industry experts like Chris Miglino of Axe Compute emphasized that companies are still raising capital and enterprises continue to spend. Increased regulation in some areas could lead investors and customers to prefer cloud providers with established capabilities and efficient operations. Miglino highlighted that companies with secured power, financing, and operational expertise would be in a stronger position moving forward.