The results of the 2026 midterm elections are already causing seismic changes in the world of artificial-intelligence spending. Despite the market turbulence for technology and energy stocks in the days immediately following the results, in the long run, hyperscaler stocks could benefit. But to do so, the companies driving the AI buildout are going to have to adapt to the new political reality.

Democrats flipped both the House of Representatives and the Senate, and multiple states elected Democrats as governors, including in longtime Republican strongholds like Iowa, Ohio, and Texas.

At first, that market seemed pleased. Hyperscaler stocks rose significantly Wednesday. Amazon.com closed up 6.1%, while Microsoft jumped 6.7%, Alphabet rose 3.2%, and Meta Platforms gained 1.4%.

The euphoria didn't last, though. Those gains were largely wiped out Thursday. Amazon declined 2.2%, Microsoft fell 3.6%, Alphabet dropped 2.2%, and Meta slipped 4%. Far harder hit were the chip stocks, the pick-and-shovel components of the AI buildout, and those likely to be hurt most by any slowdown in spending from the hyperscalers, which investors expect a blue wave portends. Stocks like Nvidia and Dell Technologies -- two major AI hardware makers -- tumbled 9.3% and 15%, respectively.

Data centers proved a key issue for voters this election cycle. While companies can't build them fast enough to meet Big Tech's insatiable demand for AI compute, many Americans would rather they weren't built at all, or at least weren't built in their backyards. Almost every data-center-related ballot measure passed.

While citizens on both sides of the aisle are opposed to unfettered data-center growth, ahead of the election many elected Republicans had shown more eagerness for the buildout, arguing ongoing AI development is essential for economic growth and to ensure the U.S. retains AI supremacy over China. Democrats, meanwhile, have questioned their environmental, water, and power supply implications.

With Democrats winning so decisively, questions about how and where data centers are built are now inevitable.

One possibility is that companies building or investing in data centers may be compelled to demonstrate they'll be accretive and beneficial rather than extractive and detrimental. That could include committing to generate all of the power they require or guaranteeing water usage won't impact local communities. These sorts of moves will eat into margins, but they may be necessary to win the support needed to continue expanding data-center capacity.

Alphabet's Google took steps in this direction Thursday when it announced that it's building its first data center in Wyoming (where Republican Harriet Hageman won the Senate race). Google says it will pay for 100% of the power the facility uses and it will be air-cooled to minimize strain on local water resources.

Which states companies deem data center-friendly could change too. Texas is a prime example. Plentiful space and low costs have made it attractive. Oracle and OpenAI, for example, have a sizable data center in Abilene, Texas. Tesla, meanwhile, has its own "Giga Texas" facility in Austin, and has invested $16.2 billion in a joint facility with SpaceX -- dubbed the "Terafab" -- in Grimes County.

But Texas flipped blue on Tuesday night for the first time in decades. Not only did Democrat James Talarico win the Senate race, but Democrat Gina Hinojosa beat Republican incumbent Greg Abbott to become the state's next governor.

LPL Financial Chief Equity Strategist Jeff Buchbinder writes that he expects data centers will still be built, but "strong performances by democrats in key data center states (and pushback from the not in my backyard folks) may slow it down some."

That isn't necessarily a bad thing.

Investors worry about how much tech companies are spending on building AI infrastructure and where the money is coming from. Companies that were once free-cash-flow-generating machines have gone free-cash-flow negative, and investors are getting impatient for proof that the enormous spending is converting into revenue-generating products and services.

Alphabet and Amazon stocks both fell following their most recent earnings reports after the companies posted impressive numbers from their cloud businesses, but also growing capex and negative free cash flows.

Where tech giants used to be able to fund new initiatives from their cash reserves, they're increasingly turning to debt markets, worsening concerns that a bubble has formed and a sizable and painful correction is incoming.

If new legislation forces the hyperscalers to tap the brakes on their data-center building, capex will slow, and cash flows might improve. At the same time, the companies could claim they would be growing faster if only they weren't hamstrung by legislators, which could provide some cover should the market seek to punish them for curtailing their spending.

"If the new political structure slows all companies' AI-related capex spending, this is better for their share prices, since revs from existing capacity are unaffected, but capex estimates would fall, implying higher near-term [return on invested capital] for the hyperscalers," writes Needham senior analyst Laura Martin.

Companies could use the lull to restock their cash reserves, and might be able to take on less debt. That would likely be seen as a positive move given the Federal Reserve has raised interest rates to battle rising inflation.

A more regulation-heavy political environment would also favor the hyperscalers over smaller cloud providers.

"If there are going to be data-center moratoria, it's gonna be harder to fill them and harder to get them approved, et cetera. That benefits the entrenched cloud providers," says Steve Sosnick, chief strategist at Interactive Brokers. "If we assume that demand continues to increase and it becomes harder to increase supply, who benefits? It's the ones with the most capacity who can charge more."

Also, while Microsoft, Alphabet, and Amazon are betting on AI for growth, they each have well-established existing businesses and revenue streams. That isn't true for pure-play cloud providers for whom a slowdown could be devastating.

Neocloud providers CoreWeave and Nebius Group dropped 9.9% and 6.7% on Wednesday, respectively, and a further 9.8% and 15% on Thursday.

Hyperscalers couldn't slow down data-center spending on their own, but the midterms may have given them the perfect excuse to do just that. In the long run, it may prove to be a blessing in disguise.