AI, data-center stocks slip as Democratic sweep clouds expansion plans

AI and data center-linked stocks slipped ​in premarket trading on Thursday ‌as Democrats' ​sweeping US midterm victory raised concerns about potential hurdles to the industry's rapid expansion. Neocloud stocks, which have become a barometer of ‌investor anxiety over heavy AI spending, fell, with CoreWeave and Nebius down about 4% each.

Investors worry Democratic control of Congress could bring tougher scrutiny of the data-center industry, potentially slowing development at a time when ‌public opposition to new facilities is already mounting. Around 30% of expected US data center capacity ‌additions in 2028 could be at risk from potential construction pauses, UBS analysts estimated, highlighting the threat to an industry whose growth depends on a rapid buildout of new facilities.

The political uncertainty adds to pressure on the broader ⁠AI trade, as ​investors increasingly question ⁠whether the enormous capital spending required to build AI infrastructure will generate sufficient returns. "The market's moving from the promise of ⁠AI to the price of AI," said Ted Parkhill, founder and CEO of Incline Investment Management.

"There's no question ​that AI is going to be transformative for the world in the long run. But ⁠that doesn't mean every AI-related stock is currently priced appropriately. There's going to be a lot of turmoil." Data-center operators Applied ⁠Digital, ​Cipher Digital and IREN fell about 4% each.

The weakness extended to utilities and equipment suppliers exposed to the buildout. GE Vernova fell 1.2%, while Constellation Energy slipped 0.7%. Hyperscalers defied the selloffas ⁠investors wager that slower data-center construction could rein in Big Tech's AI spending and make existing facilities ⁠more valuable.

Amazon.com, Alphabet ⁠and Meta were up nearly 1% each, and Microsoft was flat. Separately, Qualcomm plunged 9% after quarterly smartphone-chip sales missed Wall Street estimates. Chipmakers Nvidia, Intel ‌and Broadcom slipped between ‌1.5% and 2.2%.