AI data center stocks dip, renewables surge after Democrat sweep in US midterm elections
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Nov 4 : Data center stocks slipped in premarket trading on Wednesday, while clean-energy shares surged after Democrats won both the Senate and the House, raising prospects of tougher oversight of the AI boom alongside fresh backing for renewables.
The Democrats scored sweeping victories in Republican strongholds such as Kansas for the first time in generations.
Texas and Georgia, which are key states for data centers given their ability to host large-scale facilities, also elected Democratic candidates.
The results will usher in a divided government in Washington, following two years in which the Republican-controlled Congress rarely exercised its power to rein in President Donald Trump.
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Market reaction spanned sectors including AI-linked stocks, renewables, healthcare companies and prison operators.
DATA CENTER STOCKS
Data center operators lost ground, with Core Scientific down 2.8 per cent and Iren down 1.4 per cent. Applied Digital and CoreWeave were marginally lower.
The data center boom triggered public backlash this year, stoking concerns that tighter Democratic oversight could curb spending momentum at a time when investors are becoming wary of mounting AI outlays yet to deliver strong financial returns.
Though analysts doubt any legislation could meaningfully stall data center construction, a Democratic-led Congress increases prospects of more hearings and investigations related to the AI buildout.
“AI has been an enormous engine powering the US economy, so any curbs on its future development could threaten to put the brakes on growth,” said Kit Rees, investment strategist at Quilter.
CLEAN ENERGY
A Democratic sweep could reinforce expectations that federal support for clean-energy development will remain in place, while approvals for energy and infrastructure development could be accelerated.
Democrats plan to scrutinize the Trump administration’s efforts to roll back emissions rules and could use the Congressional Review Act to overturn regulations that make it easier to sell gas-powered trucks and SUVs.
Shares of solar maker First Solar gained 9.4 per cent, residential solar installer Sunrun added 10 per cent and inverter maker Enphase Energy was up 7.6 per cent. Clean-power developer NextEra Energy inched 2.2 per cent higher.
“The more that oil and gas prices rise, the bigger the incentive, the bigger the economic incentive to roll out clean energy,” said Paul Jackson, global market strategist for EMEA at Invesco.
Europe’s Vestas and Orsted rose 5 per cent and 7 per cent, respectively, while Portugal’s EDP Renewables was up 4.4 per cent.
ELON MUSK-LED COMPANIES
Shares of Elon Musk’s rocket and space technology company SpaceX dropped 3.2 per cent, while EV maker Tesla was down 3.6 per cent.
“It puts into doubt a potential merger between SpaceX and Tesla. While Congress cannot stop a merger, they could slow it down via extra scrutiny,” said Kathleen Brooks, research director at XTB.
“Musk had poured hundreds of millions into the Republican Party ahead of these elections…we could see stocks linked to Musk struggle now that his political enemies have won back control of Congress.”
Trump Media & Technology Group, majority-owned by Trump, dropped 7 per cent.
DEFENSE STOCKS Defense stocks such as Northrop Grumman fell 5 per cent, while RTX, Lockheed Martin and L3Harris lost over 3 per cent each. The sector had been underpinned by expectations that the $1.5-trillion budget request by Trump would not face headwinds in a Republican-dominated Congress.
However, in a Democrat-led Congress, analysts project the funding could fall short of expectations.
HEALTH INSURERS AND HOSPITAL OPERATORS
Shares of hospital operators such as HCA Healthcare and Universal Health Services gained 3.7 per cent and 2.2 per cent, respectively.
Insurers such as Centene rose 4.5 per cent and Molina advanced 6 per cent.
Democrats have pushed for universal healthcare policies that could mean more government spending allocated to the sector.
BNP Paribas economist Anis Bensaidani said Democrats may lack the numbers to pass legislation restoring major parts of the Affordable Care Act, but they could still win concessions while negotiating over defense spending and government funding.
PRISON OPERATORS
Prison operators such as GEO Group and CoreCivic fell 6.7 per cent and 5.2 per cent, respectively. The two stocks have rallied sharply since Trump won the presidency two years ago, as his clampdown on illegal immigration boosted the need for detention facilities.
Source: Reuters
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