Nvidia (NVDA) shares declined on Wednesday, part of a broader semiconductor sell-off, as Democratic victories in the U.S. midterm elections fueled concerns that data center construction could slow or become more expensive. The stock was down about 1.5% in afternoon trading, while other chipmakers also faced pressure.
Micron Technology fell more than 5%, Intel dropped around 3.7%, and Broadcom lost over 1%. The Philadelphia Semiconductor Index was down more than 3%. In contrast, broader markets rallied, with the Dow Jones gaining nearly 3%, and the S&P 500 and Nasdaq each up about 1.8%.
Election Results Raise Data Center Concerns
Investors had been wary that a Democratic sweep could impose stricter regulations on data center construction, a key driver of the AI infrastructure boom. The victory of Democrat Gina Hinojosa in the Texas gubernatorial race intensified these worries, as she had pledged to impose an immediate moratorium on new data center projects in the state. Hinojosa defeated Republican incumbent Greg Abbott in a significant upset, having campaigned on stopping what she called the "data center takeover."
Texas is central to U.S. data center expansion, accounting for about 27% of planned capacity, according to Wells Fargo. Dan Ives, partner at Yorkville Ives & Co., said the election results could slow the pace of data center construction nationwide. "For tech investors the big focus is will these mid-term elections slow the pace of the planned 800 to 1,000 data centers across the US fueling the AI Revolution…the answer in our view is a clear YES," Ives wrote in a note.
Ohio Emerges as Another Hurdle
Ohio also poses potential delays. Morgan Stanley analysts noted that the election of Democrat Amy Acton as governor creates significant risk of project delays, including a 10-gigawatt development involving Nvidia that would be Ohio's largest data center project. Nvidia has agreed to invest up to $105 billion to support one of the world's largest data centers, which will be leased to OpenAI. The state had already imposed a moratorium earlier this year on new applications for data center tax exemptions.
Goldman Sachs economists warned that political changes could affect infrastructure investment. "Democratic wins at the state and local level are likely to lead to short-term data center moratoria, potentially affecting about 45% of planned US data center capacity expansion," they said in a note.
Impact on Nvidia's Growth Outlook
A slowdown in data center construction could eventually temper demand for Nvidia's graphics processing units (GPUs), which are essential for training and running AI models. However, Ives argued that the change might result in a more measured expansion rather than derailing long-term growth. "We have always said 5%-10% of data centers might not get built from the political backlash, but the Street still is way underestimating the future revenue growth and profitability that AI will bring," he added.
DA Davidson analyst Gil Luria told MarketWatch that election results could make data centers more expensive to build, with additional costs potentially becoming "prohibitively expensive" in some states. Luria explained that data center projects are typically negotiated at the local level, allowing municipalities to set terms. "Overall, the additional hurdles for data centers may act to slow down the buildout in the US, which could limit the deployment of the chips that go into those data centers," he said.
For Nvidia investors, the concern is that even if AI computing demand remains strong, delays in approvals, higher infrastructure costs, and local opposition could affect the pace at which new capacity comes online.
This article is for informational purposes only and does not constitute financial advice.
