Democrats' Midterm Sweep Fuels $750 Billion Big Tech Rally

Democrats' sweep of both chambers of Congress and several governorships sent shares of the largest US technology companies soaring on Wednesday, as investors bet that new limits on data-center construction could make the hyperscalers' existing capacity more valuable while easing their spending.

Shares of Amazon (AMZN) surged 7.4% to a three-month high while Meta Platforms (META), Alphabet (GOOGL) and Microsoft (MSFT) gained between 2% and 6.3%, powering a rally on Wall Street after days of selling fueled by fears over the AI boom's soaring costs, according to Reuters. Apple (AAPL), which has avoided Big Tech's massive AI spending but is feeling the sting of an AI-fueled surge in memory chip prices, jumped nearly 7% to a record high.

If the gains hold, the five companies are on course to add more than $750 billion in combined market value.

The rally marks a sharp reversal for the battered cloud giants after their quarterly earnings showed how the AI infrastructure race was turning once cash-rich, debt-light companies into heavy spenders reliant on borrowing. Microsoft was the notable exception, with $18.6 billion in cash flow.

The gains followed landslide midterm victories for Democrats who oppose data centers, including in Texas, likely accelerating a backlash against the power-hungry, water-intensive and noisy facilities at the heart of the AI boom but increasingly unpopular with local communities.

Art Hogan, chief market strategist at B. Riley Wealth, said there may be a bit of a slowdown or some bumps in the road for future data-center build-out. The hyperscalers already have data centers, so those assets are more valuable now because there will not be an overbuild of data centers. A slower pace of data-center build-out would mean a slower pace of CapEx spending, which would impact the hyperscalers.

The tech giants have been building capacity at a blistering pace, with plans to spend more than $740 billion this year, up from roughly $400 billion last year, far outstripping smaller AI cloud rivals such as CoreWeave and Nebius.

Shares of smaller players including Applied Digital and Iren plunged between 6% and 13% on fears that curbs on data-center construction could derail their debt-fueled expansion plans. The companies have been spending several times their revenue to meet a swelling backlog of orders.

Dan Ives, senior managing director and tech analyst at Yorkville Ives, said the biggest worry of the night for tech investors and the AI trade was around the state of Texas, where about 25% to 30% of data-center gigawatts and capacity will come from. Now it will happen at a more measured pace, which is likely a good thing in the eyes of many investors.

What comes next

Whether the election results translate into actual construction curbs, and on what timeline, remains unclear. Republicans still hold the majority in the Texas Legislature, limiting how much a new governor can change state policy.