Tech Stocks Slump After Election

The iShares Semiconductor ETF (SOXX) lost nearly 9% on Tuesday following the midterm elections, marking the start of a steep sell-off in artificial intelligence infrastructure shares. The decline intensified on Thursday as investors reacted to pledges from incoming Democratic officials to restrict data center construction. Chipmakers led the market downturn, with Nvidia shares dropping 8% and Advanced Micro Devices falling more than 14%.

Sen. Bernie Sanders, I-Vt., called for an immediate national pause on new facilities in a post on X on Tuesday. He cited local referendums that approved restrictions on data centers and warned that Big Tech oligarchs were threatening the environment and jobs. Sanders stated that the message to political leaders is clear, urging a national data center moratorium now.

Rep. Yassamin Ansari, D-Ariz., argued that pausing AI development must be the top priority for the new Democratic House majority on Day 1. Rep. Greg Casar, D-Texas, chair of the Congressional Progressive Caucus, amplified her message. According to the CNBC Voter Poll, 56% of voters identified AI and data centers as a major factor in their ballot choice. Of that group, 65% voted for a Democratic candidate for Congress.

Winning candidates in key states used their victories to target the sector. In South Carolina, Sen. Annie Andrews defeated Sen. Darline Graham, who had been branded data center Darline during the campaign. Andrews stated in her victory speech that local people, not Washington billionaires, should make decisions for their communities. In Ohio, Sen. Sherrod Brown defeated incumbent Jon Husted and declared that he does not work for data centers.

Gov. Josh Shapiro of Pennsylvania, who signed an executive order in August to slow development, said big tech companies should not determine residents' futures. He emphasized that local communities must have the final say. In Texas, which holds 27% of planned data center capacity according to Wells Fargo, Democrat Gina Hinojosa defeated Gov. Greg Abbott. Hinojosa said in a video posted in late October that she would issue a moratorium on all data center approvals until the legislature passes protective laws.