Tech Stocks Plunge as Democrats Gain Ground in US Midterms

Technology stocks plunged to their lowest level in over a year Thursday, following a wave of Democratic victories in the U.S. midterm elections that triggered a mass sell-off by investors.

The sector-wide decline, reported by L’Express, reflected deepening fears that new regulations could impede growth, particularly for data center projects in states now controlled by Democrats.

The rout was led by prominent companies tied to artificial intelligence and data infrastructure. SpaceX, Elon Musk’s aerospace firm, which had invested $150 million in support of Republican Texas Attorney General Ken Paxton, saw its value drop by nearly 13% after Democrat Gina Hinojosa won the race for Texas governor. The sharp losses across the tech sector prompted one financial publication to declare, “Silicon Valley lost the midterms.”

The market turmoil was directly linked to the election results, which saw Democrats gain key governorships and legislative control in several states. Selling pressure accelerated on American markets as investors rushed to divest from tech stocks. Analyst Timothy Casaletto of Wellington Management told the Wall Street Journal that investors were trying to “get rid of anything related to AI.”

While some tech stocks rebounded on Friday, all major U.S. market indices still closed the week in the red. The week's performance showed the immediate market reaction to the political situation, though whether the downturn is temporary or part of a longer-term slowdown is unknown.

The core concern for technology giants is the threat of stricter regulations, particularly in states like Texas, Ohio, and Georgia—where large, controversial data center projects are planned. These states are now under Democratic leadership, raising alarms about potential delays or increased operational costs for tech firms.

“What the elections have brought us is quantifiable proof that there is genuine hostility toward the development of data centers,” Matt Rowe, a senior portfolio manager at Man Group, told the Wall Street Journal. His comments highlight a shift in the political climate that could directly impact future infrastructure investments.

The political shift will heavily affect the tech industry's immediate future. Dan Niles, a hedge fund manager at Niles Investment Management, told the Washington Post that half of the new data center capacity expected in the coming year is slated for four states now controlled by Democrats. He warned that “excessive” regulation could compel major cloud companies to “invest elsewhere.”

“The biggest companies in the world can’t afford to sit on their hands,” Niles argued. “They will set up their infrastructure where it makes the most sense. And plenty of places would be ready to welcome them.”

For many tech leaders, the market jitters are not new. The midterms have merely reignited a pre-existing anxiety about the political environment. In response, numerous companies are now recruiting Democratic consultants to influence the upcoming 2028 presidential campaign, according to The Atlantic.

Politico reported that OpenAI’s communications director circulated a memo on Capitol Hill, warning that the 2028 election’s central issue would be AI. The memo reportedly stated, “We already know what the main issue of the 2028 election will be: it will be AI.”