Tech Giants Rally After Democrats Win Midterm Elections

Major US technology companies posted substantial stock gains Wednesday after Democrats secured victories in the midterm elections, taking control of both the House and Senate. The results eased investor uncertainty about the political outlook and helped lift shares across several of the industry's largest companies.

During Wednesday's trading session, Amazon shares jumped 8%, Google gained more than 6%, Microsoft advanced 4%, and Meta climbed 3%. Apple also rose nearly 7%, following earlier disputes over tariffs imposed under President Donald Trump and recently received refunds.

David Kelly, chief global strategist at JPMorgan Asset Management, attributed the market's positive reaction to reduced political uncertainty following Tuesday's election results. Speaking on CNBC's Squawk on the Street, he described the potential economic implications of divided government.

"Moderation in growth, moderation in inflation, less uncertainty, and I think that's all helping the stock market move up today," Kelly said.

While major technology companies advanced, shares connected to Elon Musk and several businesses involved in artificial intelligence infrastructure moved lower. Investor concerns centered on potential restrictions affecting the construction of large AI data centers.

According to the election results, voters rejected restrictions or measures supporting AI data center development in 40 of 41 local ballot measures. A CNBC Voter Poll also found that 56% of voters considered data centers a crucial or major factor in their voting decisions.

Democratic candidates who advocated data center construction moratoriums also won gubernatorial races in Texas, Georgia, and Ohio. These victories raised concerns that additional state-level regulations could delay or prevent planned infrastructure projects.

Macquarie analyst Paul Golding highlighted the regulatory responsibilities that could affect data center construction and operations.

"Recall that backup power emissions, zoning, water, interconnect/grid, and tax considerations are often overseen by state regulators," Golding wrote in a Wednesday research note.

Despite those concerns, Golding maintained a positive outlook on AI infrastructure, particularly for companies with substantial financial resources and established operations.

"Neoclouds may pay more to lease powered shells for GPUaaS commitments (and pass on costs), while hyperscaler/AI lab capacity needs could intensify competition for even more limited supply," Golding wrote.

Hyperscalers, the largest cloud computing providers, benefited from their financial strength and experience building AI infrastructure. These companies typically combine substantial capital expenditures with strong free cash flow, giving them an advantage in developing large-scale data centers.

Needham analyst Laura Martin argued that stricter regulatory requirements could strengthen the competitive position of established providers.

"We believe higher regulatory barriers entrench incumbents, and increase risks (and raise required ROICs) for new entrants," Martin wrote in a Wednesday research note. "Hyperscalers are AI incumbents."

Smaller AI-focused cloud providers, commonly known as neoclouds, experienced sharper declines. CoreWeave shares dropped 10%, while Baird analysts described the election outcome as a "sentiment headwind" for the sector.

Other companies exposed to the AI infrastructure market also recorded losses. Tesla shares fell 2%, SpaceX declined 3%, and Nvidia, a major supplier of chips used in AI data centers, slipped slightly more than 1%.

Chris Miglino, CEO of Axe Compute, said the election results could affect development differently across individual states without necessarily bringing a nationwide halt to data center construction.

He noted that companies continued raising capital, businesses maintained their technology spending, and demand for additional computing capacity remained in place. Regulatory differences could also influence which cloud providers attract investment and customers.

"If you've already secured power, have the financing in place and understand how to deploy and operate compute infrastructure efficiently, you're in a much stronger position than a company that's still trying to figure those things out," Miglino said.