Does the Democratic midterm victory spell the end of US AI data centre boom?

The sweeping midterm election victory by US Democrats has triggered warnings from analysts that an impending regulatory clampdown could derail the nation’s multi-trillion-dollar artificial intelligence data centre buildout.

Wall Street forecasters slashed their projections for Big Tech infrastructure spending hours after the vote, cautioning that a wave of proposed project moratoria and tighter oversight could stall up to 30 per cent of planned US facilities and force developers to downscale their capacity plans.

The tech-heavy Nasdaq 100 plunged more than 6.3 per cent, wiping out US$2.3 trillion in market capitalisation, while the broader S&P 500 tumbled 4.4 per cent, erasing US$2.8 trillion. It marked the worst day for both benchmarks since April 2025, when global tariffs under US President Donald Trump sent world markets into turmoil.

Market sentiment on the breakneck buildout of US AI data centres, which had enjoyed strong support under the Trump administration, deteriorated almost overnight as political headwinds shifted in key states.

Texas emerged as ground zero for investor anxiety following the victory of Democratic Governor-elect Gina Hinojosa, who pledged an immediate freeze on approvals for new data centres until state authorities address mounting concerns over surging electricity tariffs, water consumption and impact on local communities.

Compounding Wall Street’s unease, newly elected progressives in Washington quickly signalled plans for federal intervention.

Less than 24 hours after Democrats recaptured majorities in both chambers of Congress, US Representative Yassamin Ansari of Arizona publicly urged a pause on advanced AI development, stricter oversight of the industry and a ban on artificial superintelligence.

The political shift across the country prompted financial institutions to aggressively downgrade their growth forecasts for domestic AI facilities.

Analysts at US investment bank Yorkville Ives said they now expected Big Tech capital expenditure growth to peak in 2027, ahead of previous projections of 2028 or 2029.

“While Big Tech and hyperscaler capex should still easily exceed US$1 trillion in 2027, the growth rate into 2028 will clearly moderate significantly as the data centre buildout comes at a much slower pace given the political map, especially in the state of Texas,” the bank said in a research note.

Yorkville Ives projected that of the 800 to 1,000 AI data centre projects currently planned nationwide, at least 10 per cent faced cancellation, while another 20 per cent could encounter prolonged regulatory delays.

Industry experts warned that a protracted pause on utility-scale facilities would ripple across the entire tech ecosystem.

Felix Wang, managing director and global tech sector head at Hedgeye, described the rout as “very bad for AI names”, warning that bottlenecks in major hubs could force frontier developers such as OpenAI and Anthropic to turn to smaller 20-to-30 megawatt facilities.

Wang added that the regulatory overhang could potentially delay Anthropic’s planned public debut from this month until next year, amid speculation that its valuation could be lowered to between US$1 trillion and US$1.25 trillion.

Wall Street trading desks reported intense, one-sided selling throughout the day.

John Flood, head of Americas equity execution services at Goldman Sachs, told clients the desk saw an abrupt reversal from Wednesday’s frantic activity, with phones “exploding” from investors seeking guidance but almost no willing buyers stepping in.

The sell-off was especially brutal across the hardware supply chain powering the AI data-centre buildout. The Philadelphia Semiconductor Index tumbled 12 per cent. Nvidia lost more than 9 per cent, while Advanced Micro Devices (AMD) plunged over 17 per cent.

Entities closely linked to tech billionaire Elon Musk were also hit. Shares of SpaceX and Tesla tumbled by more than 9 per cent and nearly 11 per cent, respectively, wiping more than US$300 billion off their combined market values on Thursday.

Musk had injected nearly US$450 million into Republican campaigns during the midterms, including heavy backing for Ken Paxton’s failed US Senate bid in Texas.

Trump swiftly took to Truth Social to blame the crash on the election outcome.

“The Stock Market suffered one of the worst days in History based on the results of the Election. Such a sad thing to watch!” Trump wrote.

“It took so much work to get us to a level that no one has ever seen before, and then this. Your 401(k)s have, therefore, dropped. Remember, it wasn’t Republicans, it was Dumocrats.”