Shares of Amazon.com Inc., Microsoft Corp., Alphabet Inc. and Meta Platforms Inc. closed higher today following Democrats’ resounding midterm victory.
Amazon jumped 8.3% at one point and ended the trading session 6.1% higher than Tuesday. Microsoft gained nearly 6.7% while Alphabet and Google rose by about 3.1% and 1.4%, respectively. Multiple industry analysts tied the stock gains to the companies’ artificial intelligence buildout.
Democrats won both chambers of Congress on a campaign that emphasized data center restrictions. Furthermore, voters approved 40 ballot measures focused on blocking or limiting AI infrastructure projects. Bloomberg cited Robert Pavlik, a senior portfolio manager at Dakota Wealth Management, as saying that tech giants’ shares jumped because investors believe a data center slowdown could improve their finances.
Amazon, Meta and Google have become cash-flow-negative in recent months because of their steep infrastructure investments. Last Wednesday, the search giant reported a negative cash flow that exceeded the consensus estimate by about $6.4 billion. Google’s stock price plummeted 10% in after-hours trading even though its cloud revenue more than doubled.
Needham & Co., B. Riley Wealth and prominent tech industry analyst Ben Thompson highlighted another possible contributor to the stock rally. New restrictions on AI projects would make computing infrastructure more scarce, which would boost the value of existing data centers. That would benefit the tech giants that logged share price gains today.
Thompson noted that neoclouds, or emerging AI-focused cloud providers, may also benefit in certain respects. Developments for which they have already secured regulatory permission could become more valuable. At the same time, they may find it more difficult to finance new sites.
That dynamic weighed on chip stocks today. Nvidia Corp. and Intel Corp. both shed more than 3% of their value, while Broadcom Inc. declined 2%. SK hynix Inc., the world’s largest supplier of HBM memory for graphics cards, dropped by more than 5%. One notable exception was Advanced Micro Devices Inc., which ended the trading day about 1% higher.
Thompson noted that the midterms could also affect the AI industry in other ways. He pointed out that a stricter regulatory environment may give space-based data centers a boost. Anthropic PBC and OpenAI Group PBC, in turn, could see their hardware costs decline if new restrictions are placed on frontier model training. Such a development may ease their path to profitability.
Last month, Meta announced plans to sell up to $95 billion in shares to finance new data centers. On Monday, Oracle Corp. filed to issue $20 billion worth of bonds and shares in connection with its own AI buildout. It’s currently unclear how the midterm results will affect those initiatives and other large-scale data center projects currently underway.