The Nasdaq plunged 5.1% Thursday, entering into correction territory, as investors and industry leaders braced for a data-center reckoning in the wake of Democrats’ midterms sweep – fearful the new Congress will slow the pace of projects and hit revenue at top AI labs.
The Dow Jones Industrial Average turned negative – falling 1,097 points, or 2.1% – after recording its best day in 18 months on Wednesday. The S&P 500 tumbled 3.2% as the Nasdaq dropped over 10% from a recent record set in October.
“Neocloud” firms – which buy AI compute and lease it to other companies – like CoreWeave and Nebius plunged 14.6% and 18%, respectively. Data-center operators like Iren and Applied Digital fell 20% and 19.7%, respectively, while equipment maker GE Vernova dropped 9.2%.
OpenAI is already trying to stem backlash, pledging to work with local communities and reduce power usage, even as Meta’s president admitted that data center buildouts are “going to be harder” moving forward.
There were “many different factors” that played into Dems’ decisive victories on Tuesday, taking decisive control of the House and Senate – but data centers were front and center in exit polls across the country, Meta President Dina Powell McCormick said Wednesday.
Voters widely rejected data centers in Tuesday’s elections, which saw 50 referendums related to the controversial sites. In at least 46 of those cases, Americans voted against building new data centers.
Sam Altman’s OpenAI – one of the world’s leading AI labs – is trying its best to win over opponents, with everything from promises to local communities to a simple rebranding of “data centers” to “compute campuses.”
On Thursday, the company released its “National Community Compact,” which provides a more stringent framework for data-center construction – including pledges to reduce power usage during peak times and share data about any impacts to noise, water and energy use.
It vowed to ensure that local residents don’t end up footing the bill for higher electricity costs; publicly release construction plans; have fewer circumstances where local officials will be forced to sign non-disclosure agreements; and set local hiring goals for nearby towns.
Data center advocates have zeroed in on the economy — a major factor in the midterms for Americans frustrated with the cost of living – arguing massive buildouts bring jobs and revenue to local communities.
OpenAI said it worked on its “Compact” for months prior to the election results, likely anticipating some blue wins – though some unexpected victories this week could have a huge impact on tech giants.
In Texas, for example – home to roughly 26% of planned data-center capacity – James Talarico won the US Senate race, Gina Hinojosa beat three-term Gov. Greg Abbott and every county shifted left in a stunning flip.
“The growth rate into 2028 will clearly moderate significantly as the data center buildout comes at a much slower pace given the political map especially in the state of Texas,” Dan Ives, partner and analyst at Yorkville Ives & Co, wrote in a Thursday note.
Construction pauses could impact around 30% of planned data center capacity in 2028, according to UBS analysts.
Meta’s Powell McCormick said at a WSJ tech conference that the opposition could be so massive that AI hyperscalers turn to other countries.
“I can also tell you that every hyperscaler is now thinking about, ‘Do we need to build outside the United States?’ Because they’re enormous investments, hedging those investments is a wise thing to do,” she said.
Meta is working on several massive data centers in states including Louisiana, Ohio and Texas, where incoming Dem office holders campaigned on construction pauses – but some of them may already be willing to come to the table.
“We did have a governor that won last night who did make data centers a big part of their platform say, ‘As soon as we get past the inauguration, let’s meet because we don’t want to lose this investment in our town. We don’t want these jobs to go elsewhere,’” Powell McCormick said.
OpenAI had also been speaking with residents, officials and candidates in states like Georgia, Ohio and Texas over the past few months as it put together its new promises, Chief Global Affairs Officer Chris Lehane told Bloomberg.