Tech stocks rally as election outcome reduces market anxieties

Amazon’s stock jumped 8%, Google’s rose over 6%, Microsoft increased by 4%, Meta saw a 3% rise, and Apple, previously impacted by tariffs and subsequent refunds, climbed nearly 7%.

“The divided government will lead to moderation in growth, moderation in inflation, less uncertainty, and I think that’s all helping the stock market move up today,” stated David Kelly, chief global strategist at JPMorgan Asset Management, during an interview.

Conversely, certain stocks, particularly those linked to Elon Musk and the expansion of AI data centers, faced declines. Tuesday’s election included 41 local ballot measures concerning AI data centers, with voters opposing them in 40 instances. A CNBC poll revealed that 56% of voters considered data centers a crucial or major factor in their voting decisions.

Analysts expressed concerns that Democratic gubernatorial wins in Texas, Georgia, and Ohio, who campaigned on data center moratoriums, could lead to regulatory hurdles or project rejections. Paul Golding, a Macquarie analyst, highlighted the importance of state regulators in areas like emissions, zoning, and water usage.

Tesla’s stock decreased by 2%, while SpaceX fell 3%. Nvidia, a key chip supplier for AI data centers, experienced a slight dip of just over 1%.

Many of the rising tech stocks are classified as hyperscalers – leading cloud providers with substantial capital investment and experience in constructing AI data centers. Laura Martin, a Needham analyst, noted that increased regulatory barriers benefit established hyperscalers.

Smaller AI cloud providers, often termed “neoclouds,” suffered more significant losses, with CoreWeave’s stock dropping 10%. Baird analysts indicated that the election results created a negative market sentiment for neoclouds.

Golding reaffirmed his positive outlook on AI infrastructure, suggesting that financially stable, high-quality operators are best positioned to benefit from potential slowdowns in certain states. He suggested neoclouds might face higher leasing costs, while hyperscalers could encounter intensified competition for limited resources.

Chris Miglino, CEO of Axe Compute, believes that while the election results could introduce restrictions on data center development in some areas, it doesn’t necessarily foreshadow a nationwide slowdown. He emphasized ongoing capital investment, enterprise spending, and the continued need for increased capacity. Miglino suggested that stricter regulations could prompt a closer examination of cloud computing providers, favoring those with established infrastructure and industry-specific AI capabilities.