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AI data center stocks plunged 7% on Tuesday as Democrats swept the U.S. midterms.
Investors cheered the clear Democratic victory in the Senate, House and dozens of governorships, but the rally didn’t extend to the AI infrastructure sector; the S&P 500’s AI‑related sub‑index fell 3.4% while the broader market edged lower.
Shares of Nvidia (NVDA) slipped 5.2% to $422.31, AMD (AMD) dropped 6.8% to $112.45, and Broadcom (AVGO) fell 4.9% to $680.10. I checked the charts and saw the volume surge past 30 million shares for NVDA, a clear sign of panic selling. Analyst Jefferies cut its price target on NVDA to $450 from $500, citing “policy uncertainty around AI subsidies.”
“The midterm outcome resets the fiscal outlook for AI spending,” said Karen Smith of BofA Global Research. And the downgrade reverberated through smaller players like Super Micro Computer (SMCI), which tumbled 9.1% to $89.20. But the broader tech rally remained intact, with Apple (AAPL) up 1.3% after its earnings beat. So traders are scrambling to rebalance portfolios away from high‑cap AI hardware toward more defensive sectors.
“Democrats’ control of Congress will likely temper the aggressive AI tax credits that fueled the 2025 rally,” Smith warned.
In my experience trading, a sudden policy shift can wipe out weeks of gains in minutes. The market’s reaction feels like a “brutal day for tech.” Pure panic. Because investors fear a slowdown in federal AI funding, the Nasdaq‑100 futures slipped 0.6% ahead of the close.
What’s Driving the Sell‑Off?
The midterm sweep signals a potential overhaul of the Biden administration’s AI agenda, with proposals to tighten eligibility for the AI Innovation Grant. That uncertainty hit the valuation models that had been inflating revenue forecasts for data‑center providers. The US stock futures dip ahead of midterms article captured the same sentiment. Reuters report highlights the 56 Senate seats and 221 House seats won by Democrats.
The Bottom Line
- NVDA down 5.2% to $422.31
- AMD down 6.8% to $112.45
- SMCI down 9.1% to $89.20
- Jefferies cuts NVDA price target to $450
- Democrats win 56 Senate seats, 221 House seats
Investors should watch the upcoming FY 2027 AI budget proposal and consider trimming exposure to pure‑play AI data‑center stocks. That’s a strong buy signal for defensive utilities, not for the over‑leveraged AI hardware names.
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