Opponents of data centers were among the biggest winners of the Democrats' landslide victories in the United States midterm elections, Reuters reported on Wednesday, in a result investors said points to a shifting public mood on artificial intelligence and a possible slowdown of the building boom that has propelled American economic growth and stock markets.
The clearest repudiations came in Texas and Georgia. In both states, Democratic candidates who campaigned in part on a moratorium on data center development won gubernatorial offices their party had not held for decades. In Texas, Democrat Gina Hinojosa ousted Greg Abbott as governor in an upset that ended three decades of Republican hold on the office, while fellow Democrat James Talarico became the senator-elect. In Georgia, Democrat Keisha Lance Bottoms won the gubernatorial contest, ending more than two decades of Republican control.
Both states sit at the center of the industry. GLJ Research has estimated that Texas accounts for about a quarter of the United States data center capacity due to come online by 2030, and the state has worked for years to reinvent itself as a technology hub, attracting companies such as SpaceX and entrepreneurs such as Elon Musk. In Georgia, the commercial real estate firm CBRE says Atlanta is the most active data center construction market in the country. Even so, voters in both states turned against projects that opponents say drive up utility bills, pollute the night sky with lights, and do not create sufficient jobs or taxes to justify the incentives states pay to attract them.
Investors read the results as the start of tougher oversight. "In our view, the significance of these midterm elections is more like a referendum on AI than a referendum on Trump," said Aidan Yao, a senior investment strategist at the Amundi Investment Institute. "If the AI theme is subject to some restrictions, then the US economy, US inflation and US monetary policy all become very, very uncertain." Nick Ferres, chief investment officer of Vantage Point Asset Management, said the Democrats would likely push for greater regulation, and that the two key risks to the boom, return on investment and financing, had both become more challenging. Katie Koch, chief executive of asset manager TCW, said AI providers face a public relations crisis and have so far failed to define the social utility of AI and data centers to Americans. Musk, for his part, joked on social media after the election that data centers in space were looking pretty appealing.
The market reaction was immediate. Data center operators lost ground in premarket trading on Wednesday, with Core Scientific down 2.8 percent and Iren down 1.4 percent, while Applied Digital and CoreWeave were marginally lower, Reuters reported in a companion piece. Chip and AI firms including TSMC, Samsung Electronics, SK Hynix and Kioxia also fell in Asia on Wednesday, along with bond yields.
Not everyone sees a turning point. Many analysts told Reuters that a slowdown in data center building in the United States did not necessarily herald a change in demand for AI or computing power, and some view a roughly 8 percent drawdown in the Nasdaq over the past month as an opportunity to buy. Still, the political message is hard to miss: the facilities at the heart of the AI boom are loud, thirsty for water and hungry for electricity, and the neighbors who live beside them now have winning candidates in two of the industry's most important states.