AI, data-center stocks slip as Democratic sweep clouds expansion plans
AI and data center-linked stocks slipped 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 3% and 6%, respectively.
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 5% each.
The weakness extended to utilities and equipment suppliers exposed to the buildout. GE Vernova fell 1.5%, while Constellation Energy slipped 1%. Some hyperscalers defied the selloff as investors wager that slower data-center construction could rein in Big Tech's AI spending and make existing facilities more valuable.
Amazon.com andAlphabet were up 1.9% and 1.6%, respectively. Separately, Qualcomm plunged 9% after quarterly smartphone-chip sales missed Wall Street estimates. Chipmakers Nvidia, Intel and Broadcom slipped between 3.2% and 4.9%.
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