Election Rally Splits AI Trade Winners and Losers

Wall Street rose on Wednesday after Democrats won major victories in the midterm elections, but AI-related stocks moved in sharply different directions as investors assessed whether the results could slow data center construction. Democrats who support limits on data center development won key governorships in Texas and Ohio, both major destinations for sector investment, and voters passed local ballot measures restricting projects. Bernstein analysts estimate Texas accounts for about 25% of data center construction. Democrats also took control of both chambers of Congress.

Cloud giants with existing data centers and strong demand for available computing capacity gained: Amazon rose 7%, Microsoft more than 6%, and Alphabet almost 4%. Jim Cramer called them “the incumbents.” He said investors may expect future spending to moderate and cash flows to recover, viewing the prospect of tighter spending as positive. Cramer rejected the idea that the election meant “the end of the data center,” but said financing could become harder, potentially leaving smaller providers with less access to funding. CoreWeave shares fell almost 10%, Iren dropped 11%, and Nebius slid about 6.5%; all three had already fallen sharply from their year-to-date highs.

Data center infrastructure suppliers also declined amid concern about fewer orders. Eaton and GE Vernova fell 9% and 10%, respectively, despite Eaton having reported a strong quarter and resilient demand, and GE Vernova reporting robust third-quarter results and a growing gas turbine backlog. BMO Capital Markets analysts said investors would see near-term winners and losers as they reassessed policy exposure, while existing backlogs and projects should still convert amid underlying demand growth.

Semiconductor stocks were weaker: Marvell fell 8%, Arm 5%, Micron 5.5%, Intel 3%, and Nvidia 1%. Qnity Electronics, a chip materials supplier, edged down despite reporting a better-than-expected quarter and raising its outlook; Cramer recommended buying its shares. Apple rose 6% after being squeezed by higher DRAM memory costs and raising prices on some products. Cramer said a tapering of memory price increases could ease pressure on Apple, and argued investors who sold over margin concerns would be wrong. The article concludes that investors made divergent bets and the market may overreact in both directions; it says data center construction is likely to continue, though it may look different.

Wall Street rose on Wednesday after Democrats won major victories in the midterm elections, but AI-related stocks moved in sharply different directions as investors assessed whether the results could slow data center construction. Democrats who support limits on data center development won key governorships in Texas and Ohio, both major destinations for sector investment, and voters passed local ballot measures restricting projects. Bernstein analysts estimate Texas accounts for about 25% of data center construction. Democrats also took control of both chambers of Congress.

Cloud giants with existing data centers and strong demand for available computing capacity gained: Amazon rose 7%, Microsoft more than 6%, and Alphabet almost 4%. Jim Cramer called them “the incumbents.” He said investors may expect future spending to moderate and cash flows to recover, viewing the prospect of tighter spending as positive. Cramer rejected the idea that the election meant “the end of the data center,” but said financing could become harder, potentially leaving smaller providers with less access to funding. CoreWeave shares fell almost 10%, Iren dropped 11%, and Nebius slid about 6.5%; all three had already fallen sharply from their year-to-date highs.

Data center infrastructure suppliers also declined amid concern about fewer orders. Eaton and GE Vernova fell 9% and 10%, respectively, despite Eaton having reported a strong quarter and resilient demand, and GE Vernova reporting robust third-quarter results and a growing gas turbine backlog. BMO Capital Markets analysts said investors would see near-term winners and losers as they reassessed policy exposure, while existing backlogs and projects should still convert amid underlying demand growth.

Semiconductor stocks were weaker: Marvell fell 8%, Arm 5%, Micron 5.5%, Intel 3%, and Nvidia 1%. Qnity Electronics, a chip materials supplier, edged down despite reporting a better-than-expected quarter and raising its outlook; Cramer recommended buying its shares. Apple rose 6% after being squeezed by higher DRAM memory costs and raising prices on some products. Cramer said a tapering of memory price increases could ease pressure on Apple, and argued investors who sold over margin concerns would be wrong. The article concludes that investors made divergent bets and the market may overreact in both directions; it says data center construction is likely to continue, though it may look different.