The midterms came for the data centres

The Nasdaq fell 5.5 per cent and the Dow gave back more than 1,800 points, a 3.4 per cent fall, with the AI names at the centre of it. Nvidia, whose processors underwrite most of the global build-out, closed down 9.3 per cent; Micron fell 17.5 per cent and Intel 10.3 per cent. Most of those companies had reported nothing new. Qualcomm, down 10.5 per cent, was the exception, sliding partly on a weak earnings forecast. For the rest, nothing in the earnings had changed; the politics had.

The signal came from the ballot box. Gina Hinojosa won the Texas governorship after campaigning for tighter limits on data-centre development, and has pledged to pause new approvals until fresh regulation is in place. Texas has absorbed more of the build-out than any other state, so the result lands hard, and it was not an isolated one. 

Of roughly 41 local measures on data centres put to voters this week, restrictions carried almost all of them, and in Ohio, where the governor-elect backs a conditional moratorium, voters passed limits across 14 towns. Investors who spent the year asking whether the earnings could justify the capital spent Thursday asking whether the capital would be allowed to be spent at all.

Not everyone reads this as a lasting threat. Goldman Sachs estimates that close to half of the data-centre capacity planned in the United States now faces some form of state or local pause, but expects most of those delays to prove short-lived. On that view, Thursday was an over-reaction to a wave of local politics that the capital will eventually route around.

Australia’s market spent Thursday in a different world. The ASX 200 rose 2.6 per cent to 9,065, its best session since April 2025, after a slump in oil, with Brent down almost 9 per cent to US$94.62 on hopes the election result would cool tensions with Iran, set off a broad relief rally. Technology was the strongest sector, up more than 10 per cent, and the local data-centre operator NEXTDC rose by half in a single session, even as its American counterparts were being dismantled. It was the same trade read two ways on opposite sides of the Pacific.

That local strength is misleading for anyone whose savings sit offshore. Australian superannuation funds hold large international allocations, concentrated in the same handful of American technology names that lost ground this week. A domestic index at a two-month high says very little about what happened to balances on Thursday.

There is a domestic exposure of a different kind as well. Australia has more than A$155 billion of data-centre investment in its pipeline, and it has been sold to governments and communities on the assumption that global demand keeps climbing. A political turn against data centres in the country that consumes the most of them does not leave that assumption untouched.

For a year the argument about artificial intelligence was an argument about valuation, about whether the earnings could ever justify the capital. This week it became an argument about permission. What moved these stocks was a governor’s race in Texas and a run of local ballots, and neither is the kind of risk a discounted cash-flow model handles well. Our read is that a national moratorium, the outcome the Thursday sell-off seemed to price, is the least likely of those now in play. Where we part company with Goldman is on how quickly the friction clears: state and local restrictions are close to certain and, on this week’s evidence, popular, and popular restrictions are slow to unwind. The build-out gets more expensive and more contested rather than stopping, and the repricing that started this week has further to run.