U.S. data center and semiconductor stocks down… Hyperscaler ↑

As the Democratic Party took control of both the Senate and the House of Representatives in the U.S. midterm elections, concerns grew about strengthening regulations on artificial intelligence (AI) data centers, and data center-related stocks and semiconductor stocks plummeted on the 4th (local time).

Coreweave and Nevius, neocloud companies that lend AI computing capacity, fell 9.9% and 6.7%, respectively, on the New York Stock Exchange, which closed at 6 a.m. on the 5th, Korean time, due to the end of daylight saving time in the United States.

Data center operators Iren and Hut8 plummeted 11.2% and 23.2%, respectively, while Core Scientific (10.4%) and Applied Digital (6.7%) also fell significantly.

Semiconductor stocks also suffered weakness.

Memory and storage device companies such as SanDisk (7.9%), Micron (7.0%), and Western Digital (6.8%) suffered significant falls, and SK Hynix's American Depositary Receipt (ADR) also fell 5.1%.

Nvidia fell 3.2% and Broadcom fell 2.0%.

The Philadelphia Semiconductor Index, comprised of major semiconductor companies listed in the U.S., fell 3.1% to close at 10,268.65, hitting its lowest point in more than six months.

As Democratic candidates were elected governors in Texas, Ohio, and Georgia in this election, concerns appear to have been reflected that community backlash surrounding data center construction is likely to lead to regulatory action and delays in licensing.

In particular, Democratic candidate Gina Hinojosa was elected in Texas, which accounts for about 30% of the new data center capacity expected to be operated in the United States by 2028.

Candidate Hinojosa pledged to immediately suspend approval for new data center construction. He pledged to stop reckless expansion, saying that data centers are depleting residents' drinking water and raising electricity bills.

Including Hinojosa and other Democratic candidates who won gubernatorial elections in Ohio, Georgia, and Pennsylvania, nearly half of data center projects planned across the U.S. could face temporary construction moratoriums, strict local regulations, or community backlash, Bloomberg reported.

On the other hand, cash-rich Big Tech rose.

Microsoft rose 6.7%, Amazon rose 6.1%, Apple rose 5.3%, Alphabet rose 3.2%, and Metaplatform rose 1.4%.

Among the 'Magnificent 7 (M7)', the only stocks whose stock prices fell were Nvidia and Tesla (3.3%), and SpaceX, led by Elon Musk, also fell 3.8%.

The market capitalization of the five Big Tech companies increased by about $810 billion (about 109 trillion won) in one day based on the closing price.

Reuters analyzed that this divergence in stock prices reflects expectations that the burden of big tech's cash needs may ease if the pace of expansion of AI infrastructure slows.

For the same reason, data center operators and suppliers whose growth depends on rapid construction are under pressure.

“It’s pretty clear that AI deals are going to face some headwinds,” said Scott Kronert, head of U.S. equity strategy at Citi Research. “Slowing or changing the pace of data center build-out starts to change the fundamental growth trajectory for many providers.”