AI Stocks Slide as Data-Center Backlash Sweeps Midterms

AI stocks fell sharply after the midterms as voters backed data-center limits in 40 of 41 measures and Democrats won Texas, Ohio and Georgia governorships.

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Investors repriced AI stocks within two sessions of the November 3 midterms. Voters in 40 of 41 local data-center ballot measures chose to restrict development, and Democrats won the governorships of Texas, Ohio and Georgia, three of the largest markets for AI infrastructure. On Thursday, November 5, Nvidia (NVDA) fell 9.3% to $181.60, the Philadelphia Semiconductor Index dropped more than 10%, and the Nasdaq Composite closed more than 10% below its October record.

What Happened in the Data-Center Ballot Measures?

Voters sided with limits on development in 40 of 41 local measures, which covered 10 states. Ohio alone accounted for 21 of the 41 measures, and every one of them was decided in favor of restrictions. The side favoring limited development won more than 70% of the vote in 30 of the measures.

The measures took several forms: megawatt caps, typically on projects above 25 megawatts, temporary moratoriums, rezoning referendums, advisory questions and outright bans. Measures that would have eased or expedited construction were rejected. An NBC exit poll found 76% of voters opposed new data centers in their own communities.

Which Governors Pledged to Pause Data Centers?

Three Democratic governors-elect campaigned on restricting new projects. In Texas, Gina Hinojosa defeated incumbent Greg Abbott after promising a moratorium on data-center approvals until the legislature enacts protections for residents. In Ohio, Amy Acton backed a conditional moratorium that would lift only if developers cover their full utility costs, use union labor and meet environmental standards. In Georgia, Keisha Lance Bottoms pledged a temporary statewide pause on new construction while the state studies the effect on electricity bills.

Texas carries the most weight. The state holds roughly a quarter of planned U.S. data-center capacity growth, and estimates put its share near 30% of national capacity by 2028. Candidates for the U.S. Senate also made the issue central, including James Talarico in Texas, who proposed repealing the state's data-center sales tax exemption.

Why Did AI Infrastructure Stocks React This Way?

AI infrastructure shares fell because the election result added a political constraint to a buildout already questioned over returns and financing. The reaction came in two stages.

On Wednesday, November 4, the S&P 500 rose 1.82% and the Nasdaq gained 1.94%, but companies with direct data-center exposure fell hard. Hut 8 (HUT) dropped 23.2%, Sterling Infrastructure (STRL) 21.5%, Modine (MOD) 21.4% and Cipher Digital (CIFR) 20%. Hut 8 has about 75% of its 1,330 megawatts under construction in Texas.

On Thursday the selloff spread to large-cap names. Nvidia, Broadcom (AVGO) and Oracle (ORCL) each lost about 9%. CoreWeave (CRWV) fell 14%, Nebius (NBIS) 17% and IREN (IREN) 19%. The S&P 500 fell about 4% in its worst session since April 2025, and the Nasdaq fell roughly 5.5%. The Dow Jones Industrial Average shed more than 1,000 points and gave back over half of Wednesday's gains.

Semiconductor shares were hit hardest. AMD (AMD) fell sharply despite record profits, and Qualcomm (QCOM) dropped about 13% after reporting a 26% decline in handset chip revenue. Energy and consumer staples were the only sectors to hold gains.

How Large Is the Risk to the AI Buildout?

Estimates of the exposure are large but not uniform. UBS warned that about 30% of planned U.S. data-center capacity additions for 2028 could face risk from permitting delays and local opposition. Morgan Stanley has told clients that the political backlash could push parts of the buildout into 2029.

Delays matter for suppliers because construction timing sets order timing. A deferred campus defers purchases of accelerators, networking gear, power equipment and cooling systems. The pause pledges also arrive as Texas has already tightened its own rules. Governor Abbott directed data centers to cover their energy infrastructure costs in June, and grid connection approvals were halted in August.

The concern also extends to cost. Pledges to end tax breaks threaten the economics of projects in the three states, where data-center incentives total close to $2.5 billion.

Which Companies Are Adjusting?

Some developers have begun to change their approach. OpenAI released a policy blueprint for what it now calls "compute campuses," which drops nondisclosure requirements and increases project transparency. The change is aimed at the community opposition that shaped the ballot results.

Large technology companies with diversified revenue fared better in the first session. Microsoft (MSFT) rose 6.7% on November 4, Amazon (AMZN) 6.1% and Apple 5.3%, though the second-day selloff then reached the Nasdaq as a whole. Amazon closed at $266.17 on November 11, down 1.74% on the day, while Tesla (TSLA) rose 2.91% to $390.84.

What Comes Next for the AI Trade?

The next test is Nvidia's earnings report on November 17. The company has excluded China data-center revenue from its outlook, which leaves U.S. demand and the pace of customer capital spending as the main variables. The stock has fallen below where it started the year, and it has lost close to $1.4 trillion in market value since its October peak.

Policy is the second variable. Governors-elect take office in January, and executive orders or legislative action on moratoriums would turn campaign pledges into binding limits. Senior Democrats in Congress have also called for a national moratorium, though the scope of any federal action remains undefined. Elevated borrowing costs and questions about returns on AI spending add to the pressure on the sector.

Outlook

Local ballot results and three governorships have given data-center opposition a political mandate in the states that matter most to the AI buildout. Near term, the direction of AI stocks depends on Nvidia's November 17 results and on how quickly the new governors move from pledges to policy. Over the longer run, power costs, permitting and community consent are now explicit inputs to infrastructure spending plans.