A Democratic sweep of Congress this week triggered panic among investors worried that officials will block data center construction in their communities.
Among those caught in the backlash: Vertiv Holdings and other AI power plays.
But local votes shouldn't matter that much to those companies. As long as data centers get built somewhere, Bespoke Investment Group noted Friday, the location itself is irrelevant.
"With the semis down nearly 40% from their peak on 6/22, the AI trade is in a nasty bear market," the firm wrote in a note Friday.
"It's a big world out there, however," the firm added. "And there are a lot of picks and shovels stocks tied to the data center buildout that are location agnostic, as long as the data centers get built somewhere."
How many will get built -- and when -- is a question following the shift in control of Congress. But when data centers get built, equipment suppliers make them run with chips, cooling systems and power components.
Many of those companies could use the boost.
Optical and networking stocks have plunged roughly 45% since the June 22 peak, with power and backup equipment sliding about 43% and thermal management names falling nearly 39%. Vertiv, a prominent supplier of cooling and power hardware that could face headwind from stricter oversight, has tumbled about 54% from its 52-week high, though shares rebounded 3.9% to $183.52 on Friday.
Following the midterm election results, Vertiv Holdings stock sank about 13% to $205.55 on Wednesday.
Data centers emerged as a key issue this election cycle. While companies scramble to build them fast enough for soaring AI compute demands, local opposition to hosting them has grown. Voters reacted by passing nearly every measure aimed at curbing data-center expansion.
Paradoxically, tighter rules could work in favor of hyperscalers like Amazon, Microsoft, Alphabet, and Meta Platforms. As Barron's noted this week, Wall Street has already worried these companies have been burning through too much cash building data centers. If politicians force them to slow down, that spending could slow as well, improving their cash flow and profits.
Bloom Energy was another stock poised to buck the trend. The company uses fuel cell-based on-site power to bypass the power grid, which CEO KR Sridhar previously noted could benefit from data center backlash. Shares of Bloom Energy rose 4.3% on Friday.