Micron and Other Chip Stocks Slip as Election Results Strike at the Core of Data-Center Optimism

Dow Jones
11/04

Democratic victories in Texas and other states raise long-term questions about the AI buildout, though they do not 'unwind projects already funded'

Micron shares are down about 2% on Wednesday.

A blue wave has swept both chambers of Congress, and Democrats have won key governors' races by pledging tougher tacks on data-center construction.

A key question for investors is what the new political backdrop means for chip and infrastructure stocks as Wall Street's forecasts depend heavily on new data-center capacity coming online.

For now, some key stocks are down. Shares of Intel (INTC) and Sandisk (SNDK) are off more than 2% in morning action on Wednesday, while shares of Marvell (MRVL) are off more than 5%. Micron Technology shares are down about 2%. Nvidia's stock (NVDA) is down fractionally, as is the PHLX Semiconductor Index SOX.

But StoneX's Cody Acree told MarketWatch is doubtful that the election outcomes will hinder data-center buildouts in the near term.

"While the election raises the risk of tougher permitting, power and water restrictions, and less favorable tax treatment, it does not unwind projects already funded, contracted or under construction," he said.

A particular focus for investors is Texas, which Acree calls "the clear epicenter of the U.S. AI data-center buildout, with the state likely accounting for roughly 30% of national capacity additions" through 2028.

Democrat Gina Hinojosa won the Texas governor's race after a late surge. During her campaign, she promised a moratorium until state legislators set new rules about data-center construction.

But Acree said that "the Texas AI buildout remains intact and exceptionally large, even if the political headwinds are shifting toward more uncertainty regarding planned project approval."

He said Wednesday's market action was a "reset" of valuations within the tech sector, "not evidence that 2027 data-center demand or build rates have suddenly collapsed.

However, bigger issues could emerge long term, he said, if investors believe policy uncertainty around costs or approvals for projects could limit the AI buildout farther out.

"That matters because most chip stocks are valued based on the assumption of several years of nearly uninterrupted growth," he added.

See also: Microsoft is winning the cloud wars and becoming Wall Street's new golden child

D.A. Davidson analyst Gil Luria told MarketWatch that the election outcomes mean data centers will be more expensive to build. In some states, construction may become "prohibitively expensive," he said.

He explained that data-center decisions are usually made at the local level, and each municipality can negotiate the terms of deals for projects with companies.

"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.

-Hannah Pedone

 

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