AI stocks hammered by midterm shock as data center buildout becomes a 'war of attrition'
The election rout landed on an AI trade already under pressure from high interest rates, heavy capital spending and questions about returns.
TL;DR
- AI and semiconductor stocks declined sharply after Democrats won control of Congress in the midterm elections.
- The sell-off impacts an AI trade already facing high interest rates, significant capital spending, and concerns about returns.
- Investors are reassessing the potential impact of a Democrat-controlled Congress on tech regulation and the AI boom.
- Local ballot measures restricting data center construction have been a pre-existing issue, now amplified by political uncertainty.
- Community opposition has already stalled or blocked numerous AI data center projects in the U.S.
- Some analysts believe the midterm results will slow the pace of planned data center construction across the U.S.
- Earnings season has been disappointing, with some major tech companies undershooting growth expectations, suggesting a slowdown in AI spending.
- The AI race is described as shifting to a 'war of attrition' due to scarce power favoring companies with larger balance sheets.