Democrats' midterm sweep fuels $750 billion Big Tech rally

On November 4th, Democrats' sweeping victory in midterm elections propelled US tech giants' shares to new heights, as investors anticipated potential restrictions on data-center construction. Amazon rose 7.4% to its three-month high, while Meta Platforms, Alphabet, and Microsoft climbed between 2% and 6.3%, driving a Wall Street rally after a period of selling due to concerns over soaring AI costs.

Apple, which has avoided heavy AI spending, surged nearly 7% to a record high. If the gains persist, the five companies could collectively add over $750 billion in market value. This rally represents a stark contrast to their previous quarterly earnings, which revealed that once-profitable cloud giants were now heavily reliant on borrowing for AI infrastructure investments.

Microsoft was the sole exception, boasting $18.6 billion in cash flow. The surge followed Democrats' decisive midterm victories, which could accelerate a backlash against the energy-intensive, water-intensive, and noisy data centers crucial to the AI boom but facing growing local community opposition.

Art Hogan, chief market strategist at B. Riley Wealth, noted that the post-election landscape might bring slight slowdowns or bumps in future data-center construction. Hyperscalers already possess data centers, making their assets more valuable as an overbuild is unlikely. Slower data-center build-out could lead to reduced CapEx spending, impacting the tech giants.

The tech giants have been investing billions in capacity, with plans exceeding $740 billion this year, up from $400 billion last year. Smaller AI cloud rivals, such as CoreWeave and Nebius, have been struggling under debt-fueled expansion plans and facing a slowdown in construction due to potential data-center curbs.