AI Stocks Got Hammered After Midterms, but This Analyst Says the Panic Is Overblown

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Bernstein says the U.S. midterm election selloff in AI data center stocks is overblown, forecasting limited pipeline disruption despite rising regulatory risks in Texas, Georgia and Ohio.

The Democratic sweep in the U.S. midterm has disrupted AI infrastructure and data center stocks this week, raising concerns about tighter regulations, higher electricity costs, and potential construction delays.

However, the firm believes the market reaction has been overblown, arguing that the election results are unlikely to derail the nation’s expanding data center infrastructure pipeline materially.

In a Nov. 6 report, Bernstein analysts led by Madison Rezaei estimated the nationwide impact on credible data center capacity at 2%–4%.

Data Center Pipeline Exposure Rises to 306 GW

According to Bernstein, the data center pipeline exposed to restrictive state policies increased from 249 gigawatts (GW) before the elections to 306 GW afterward.

Within that total, credible capacity increased from 78 GW to 105 GW, representing an incremental 27 GW of exposure.

The firm believes approximately 10 GW of that incremental capacity is already under construction, leaving about 17 GW potentially vulnerable to tighter regulations.

In a downside scenario where none of the exposed capacity gets built, Bernstein estimates a roughly 9% reduction in the credible pipeline. The analysts consider that outcome unlikely, forecasting a more modest 2% to 4% nationwide impact.

Texas, Georgia and Ohio Emerge As Regulatory Hotspots

Texas faces heightened uncertainty following Governor-elect Gina Hinojosa’s victory over incumbent Greg Abbott.

Hinojosa has proposed a moratorium on new data center approvals until new protections are enacted.

However, the firm noted that Texas was already experiencing permitting delays under Abbott, while the state maintained approximately 28% of nationwide construction starts before and after the earlier regulatory audit.

Rezaei anticipates Georgia could pose a greater long-term risk after Democrats secured a 3–2 majority on the state’s Public Service Commission, which could influence future electricity pricing and utility investments.

The firm noted that Georgia had already approved approximately 10 GW of capacity certification and OpenAI’s 3.2 GW power contract. However, Georgia Power’s next capacity request and its 2028 rate case remain outstanding.

In Ohio, local opposition has resulted in bans and restrictions affecting several communities.

Bernstein estimates local bans directly affect approximately 1.1 GW of credible capacity in Ohio. Another 1.1 GW tied to Amazon’s proposed Trenton development faces uncertainty ahead of a Nov. 10 township hearing./p>div class="bz-see-more-ranking-block" data-ranking="value" data-theme="light" data-variant="basic-2">

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AI Infrastructure Stocks Slide While Established Operators Gain

The firm said that the election triggered a sharp divergence between established infrastructure operators and companies dependent on future data center development.

More development-oriented AI infrastructure, neocloud, and digital infrastructure names underperformed. From Monday’s market open through Wednesday’s close, Bernstein tracked the following average stock performances:

li>Hyperscalers: +3.6%/li> li>Large Data center colocation REITs: +3.9%/li> li>Emerging AI infrastructure developers: -5.7%/li> li>Neocloud companies: -7.1%/li> li>Power and energy transition stocks: -9.7%/li>

Among individual stocks, Amazon.com, Inc. (NASDAQ:AMZN)/a>/a> gained 8%, Microsoft Corporation (NASDAQ:MSFT)/a>/a> rose 7%, and Meta Platforms, Inc. (NASDAQ:META)/a>/a> advanced 3%.

Digital Realty Trust, Inc. (NYSE:DLR)/a>/a> and Equinix, Inc. (NASDAQ:EQIX)/a>/a> each gained approximately 4%.

Conversely, Fermi Inc. (NASDAQ:FRMI)/a>/a> declined 28%, Hut 8 Corp. (NASDAQ:HUT)/a>/a> fell 15%, Soluna Holdings, Inc. (NASDAQ:SLNH)/a>/a> fell 14%, Galaxy Digital Inc. (NASDAQ:GLXY)/a>/a> and CoreWeave, Inc.(NASDAQ:CRWV)/a>/a> dropped 10%, IREN Limited (NASDAQ:IREN)/a>/a> fell 8%, while Nebius Group N.V. (NASDAQ:NBIS)/a>/a> and Cipher Digital Inc. (NASDAQ:CIFR)/a>/a> lost 6%.

Bernstein attributed the divergence to investors favoring companies with established operating assets and secured power access over developers whose valuations depend heavily on future construction approvals.

Bernstein identified Fermi America (96%), Galaxy Digital (91%) and Cipher Digital (88%) as having among the highest shares of announced capacity exposed to restrictive or hostile states.

The analyst noted exceptions including Riot Platforms, Inc. (NASDAQ:RIOT)/a>/a> up 23%, MARA Holdings, Inc. (NASDAQ:MARA)/a>/a> up 3%, and TeraWulf Inc. (NASDAQ:WULF)/a>/a> up 2%, which outperformed despite significant exposure.

The analyst expects companies with secured capacity could benefit as regulatory restrictions make available power connections increasingly scarce and valuable.

Bernstein Sees Limited Disruption From Policymakers

Despite political uncertainty, Bernstein believes economic incentives will discourage policymakers from imposing sweeping construction bans.

Bernstein estimates the value of data center projects under construction at about 8% of state-level GDP, highlighting the economic incentives for policymakers to preserve investment and employment.

The analyst cited historical examples that suggest restrictive campaign promises have remained intact only about 30% of the time.

Instead of outright prohibitions, Bernstein anticipates governments may increasingly require developers to absorb electricity infrastructure costs, accept reduced tax incentives and contribute more toward local communities.

The firm maintains favorable views on established infrastructure operators, networking and equipment suppliers, including Equinix, Digital Realty, Quanta Services, Inc. (NYSE:PWR)/a>/a>, Eaton Corporation, PLC (NYSE:ETN)/a>/a>, Vertiv Holdings, LLC (NYSE:VRT)/a>/a>, GE Vernova Inc. (NYSE:GEV)/a>/a>, Arista Networks, Inc. (NYSE:ANET)/a>/a> and Ciena Corporation (NYSE:CIEN)/a>/a>.

Among technology companies, Bernstein favors Microsoft, Oracle Corporation (NYSE:ORCL)/a>/a>, SAP SE ADS (NYSE:SAP)/a>/a> and Amazon, and highlighted TeraWulf, Riot Platforms and IREN Limited among AI infrastructure developers.

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