By Purvi Agarwal and Johann M Cherian
Nov 4 (Reuters) – Data center stocks fell in premarket trading on Wednesday, while clean energy stocks rebounded after Democrats took control of Congress, prompting investors to reposition for tougher scrutiny of the AI boom and a shift in policy priorities.
The Democrats’ victory, which included victories in traditional Republican strongholds and major data center hubs in Texas and Georgia, will usher in divided government in Washington and raises the prospect of greater congressional oversight of industries that have benefited from Republican control.
The market reaction reverberated across AI stocks, renewable energy, healthcare companies, defense contractors and prison operators.
DATA CENTER STOCKS
Data center operators lost ground, with Core Scientific down 3.5% and Iren down 3.6%. Applied Digital and CoreWeave fell 2.4% and 3.8%, respectively.
The data center boom has sparked a public backlash this year, raising fears that tighter Democratic control could slow investment, just as investors are wary of soaring AI spending and uncertain returns.
Although analysts doubt that legislation could significantly block data center construction, a Democratic-led Congress raises the prospects for more hearings and investigations related to AI development.
“AI is a huge engine powering the U.S. economy, so any restrictions on its future development could threaten to stunt growth,” said Kit Rees, investment strategist at Quilter.
CLEAN ENERGY
A Democratic victory could bolster expectations for continued federal support for clean energy while speeding up approval of energy and infrastructure projects.
Democrats plan to examine the Trump administration’s efforts to roll back emissions rules and could use the Congressional Review Act to roll back regulations that make it easier to sell gas-powered trucks and SUVs.
Shares of solar power maker First Solar gained 7%, residential solar installer Sunrun gained 6.1% and inverter maker Enphase Energy gained 3.6%. Clean energy developer NextEra Energy rose 2.3%.
“As oil and gas prices rise, the greater the incentive, the greater the economic incentive to deploy clean energy,” said Paul Jackson, EMEA global market strategist at Invesco.
European companies Vestas and Orsted rose 4.3% and 6.4% respectively, while Portugal’s EDP Renewables rose 2.3%.
COMPANIES LEAD BY ELON MUSK
Shares of SpaceX, Elon Musk’s rocket and space technology company, fell 5.2%, while electric vehicle maker Tesla fell 4.9%.
“This puts a potential merger between SpaceX and Tesla into doubt. Even if Congress can’t prevent a merger, it could slow it down with greater scrutiny,” said Kathleen Brooks, research director at XTB.
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