Tech stocks slide after Democrats win Congress, with data centre rules now in question
Investors may now favour firms with stronger balance sheets as political scrutiny of AI infrastructure grows.
Tech stocks sold off sharply in the US after Democrats won big in the midterm elections and gained full control of Congress, with the Nasdaq hit hardest. Democratic candidates had campaigned against the rapid expansion of data centres over their heavy use of water and electricity and their effect on local communities, raising the prospect of tighter rules on AI infrastructure and deployment. Investors had already been uneasy about whether the AI spending spree, projected by Goldman Sachs to reach $1 trillion in 2026, would deliver returns. One analyst expects the political shift to make traders more selective, favouring firms with stronger balance sheets, while another believes the drop will be limited because valuations had been inflated by expectations of near-unlimited AI growth.
Why it matters
The sell-off put a price on political risk for the companies building AI, which were already facing doubts about whether heavy spending would pay off. Concern over data centres, where 71% of Americans in a May Gallup poll said they would oppose one in their community, gives voters a direct reason to press for tighter rules on where and how such facilities are built. For investors, the shift could mean paying more attention to companies with sturdier finances, while the view that valuations were built on expectations of near-unlimited AI growth suggests the damage may be contained.
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