Texas and Georgia host the AI data-centre boom and both swung blue; AI cloud stocks fell and solar jumped up to 10% as the fight over who pays for power begins

Data centre stocks fall after Democrats win Congress: The US midterm election results brought different reactions across the stock market on Wednesday. Shares of data centre companies fell in premarket trading, while solar and clean-energy stocks moved higher. Investors are now looking at how a Democrat-controlled Congress could change the direction of US energy policy under President Donald Trump.

Nebius Group shares fell as much as 5% after Democrats won the Texas governor's race, even though the company has not announced any data centre projects in the state. Democrat Gina Hinojosa defeated Governor Greg Abbott after promising an immediate pause on new data centre projects until lawmakers introduce stronger safeguards.

The result added to pressure on AI infrastructure stocks, with CoreWeave falling 7%.


Investors are concerned that tighter rules in Texas could affect the wider data centre industry, even companies operating elsewhere.

The concern is significant because Texas accounts for an estimated 27% of planned US data centre capacity, according to Wells Fargo. Investors responded by selling several GPU cloud and data centre stocks, suggesting that the election result could have wider consequences for the industry.

However, Nebius does not currently list Texas among its announced US data centre locations. Its planned sites are in Missouri, Pennsylvania, Alabama and Vineland, New Jersey. The New Jersey facility is linked to the company's $17.4 billion Microsoft contract, which runs through 2031.

There is another important detail behind the Texas result. Data centre development in the state was already facing restrictions.

In September, Abbott halted all state data centre permits while officials reviewed the electricity grid. The audit is expected to be completed in December.

This means Hinojosa's victory does not immediately stop an active wave of new projects. The bigger question is what happens after the grid review. Texas could lift the freeze once the audit is complete, or the restrictions could remain until lawmakers establish new rules for data centre construction.

Reuters reported that some solar stocks gained as much as 10%. The Invesco Solar ETF also rose 5%, according to CNBC.

Why are data centre stocks falling after the Democratic victory?

Companies linked to the construction and operation of data centres faced selling pressure before the opening bell.

Core Scientific shares fell 2.8%, while Iren dropped 1.4%. Applied Digital and CoreWeave also traded slightly lower. CNBC reported that Oracle and CoreWeave were among the companies facing pressure. Elon Musk's SpaceX also moved lower.

The concern is that a Democratic Congress could take a closer look at the rapid growth of data centres. These facilities are important for artificial intelligence because they provide the computing power needed to run AI services. But they also require large amounts of electricity, land and water.

This has created a difficult situation for companies planning new projects. Investors are no longer looking only at how quickly AI demand is growing. They are also considering whether local governments will allow these facilities to expand at the same pace.

Texas and Georgia are important locations for data centre development. Both states elected Democratic candidates in the midterm elections. Democrats also made gains in traditionally Republican areas, including Kansas.

Kit Rees, an investment strategist at Quilter, said AI has become a major source of growth for the US economy. Any limits on its development could affect that growth.

Electricity costs could become a bigger problem for AI companies

The debate over data centres is not just about where companies can build. It is also about who will pay for the electricity needed to run them.

Large data centres consume huge amounts of power. Meeting their needs often requires new power plants, transmission lines and upgrades to existing electricity networks. These projects cost money, and the question of who should bear that cost has become a political issue.

Analysis from Trefis suggests that Democrats could put greater pressure on utilities to explain how the costs of new power infrastructure are being shared.

This could affect electricity companies that are expanding their capacity to serve data centres. It may also create problems for real estate investment trusts that own these properties.

However, this is not an immediate threat to their earnings. The concern is about the cost of future projects and whether companies will earn enough to justify the investment.

Democrats now control both chambers of Congress, raising the possibility of closer scrutiny of tax incentives and other support for the data centre industry. Goldman Sachs strategists see limits on tax incentives as a possibility, although they consider a nationwide moratorium on data centre construction unlikely.

Democrats are also expected to examine the Trump administration's efforts to weaken some emissions rules. They could use the Congressional Review Act to challenge regulations that make it easier to sell gas-powered trucks and SUVs.

Why did Dow futures jump despite the fall in AI stocks?

Dow futures jumped 912 points, or 1.75%, while S&P 500 futures gained 0.8%. Investors appeared relieved that the election had produced a clear result and reduced some of the uncertainty surrounding Washington.

Trump said he was willing to accept the outcome and indicated that Republicans would work with Democrats.

Andrew Slimmon of Morgan Stanley Investment Management said investors generally prefer a divided government because it prevents one party from having too much control over policy.

Stocks outside the technology sector also gained. Walmart rose 2%, while Bank of America added 1.9%.

Healthcare shares moved higher as well. Molina Healthcare gained 6.3%, Centene rose 4.7%, UnitedHealth added 1.4%, and HCA Healthcare climbed 1.44%.