AI Stocks Plunge as Democratic Governors Pledge Data Center Moratoriums

U.S. semiconductor and AI infrastructure stocks experienced a sharp sell-off following the November 3 midterm elections, which saw Democrats win both chambers of Congress. The market downturn was driven by fears of construction halts, specifically impacting companies like Nvidia and Broadcom Inc, whose growth depends on continued infrastructure build-out.

Gina Hinojosa, the Governor-elect of Texas, pledged to implement a moratorium on data center construction to assess community needs and establish legal protections for residents. Similar permit halts are planned by newly elected Democratic governors in Georgia and Ohio. In Texas, the government has already paused permits and initiated an audit into how data center energy demands affect resident utility bills.

At the federal level, Senator Bernie Sanders and Representative Alexandria Ocasio-Cortez introduced the Artificial Intelligence Data Center Moratorium Act. The bill proposes halting the construction or upgrading of AI data centers until federal legislation on worker protections and product approval is established. While analysts suggest a federal ban is unlikely due to presidential veto power and the risk of China gaining a lead in AI, the combination of state and federal pressure has rattled investors.

Amidst the market volatility, other corporate developments emerged. Elon Musk formed special committees at SpaceX and Tesla to study a potential combination of the two companies. Additionally, NVIDIA CEO Jensen Huang admitted to infidelity on November 8, amid reports that the other party may be a Chinese intelligence asset, though the company's board stated no secrets were compromised.