AI summary
Summary of article:
After the US election, the market bet on limited data center construction, leading to a surge in Microsoft and Amazon, as cloud supply may be tight and prices will expand as prices rise. In contrast, AI hardware stocks weakened, and Apple received funds support due to conservative spending.
Construction of data centers may be restricted.Microsoft (Microsoft),Amazon (Amazon ), the share price rose rapidly. Following the US midterm elections, the market is betting that new supply will be limited, leading the two major cloud players to raise prices and slow spending. Both stocks rose more than 6% on Wednesday, giving them a combined market value of about $424 billion.
With the Democratic Party taking control of Congress and key governorships, some technology companies are facing pressure from potential restrictions on building data centers. During her campaign, Texas Governor-elect Gina Hinojosa advocated suspending the construction of data centers immediately after taking office until the state government sets relevant regulations.
Limiting new construction could benefit existing cloud players. John Belton, portfolio manager at Gabelli Funds, said demand for computing power is expected to exceed supply. If data center capacity becomes more limited in the future, companies like Amazon and Microsoft may have more room to raise prices, which will increase profit margins and profits.
The slowdown in construction could also slow data center spending by both companies, putting pressure on AI investments to ease cash flow.
Microsoft closed up 6.7% on Wednesday, Amazon rose 6.1%; Alphabet and Meta also rose 3.2% and 1.4%, respectively.
Tigres Financial Partners analyst Evan Fenseth said the rally was a combination of low post-election uncertainty, new enthusiasm for AI and cloud computing and rampant short-covering. Funds that were originally hedged against the post-election decline are now reducing their defensive positions. He said the election is only a short-term catalyst, and the long-term trend still depends on AI demand and infrastructure spending.
In contrast, AI hardware companies that rely on the continuous expansion of data centers have become vulnerable. NVIDIA fell 3%, cloud computing company CoreWeave fell 10%, and the iShares Semiconductor ETF (SOXX) also fell more than 3%.
Apple, on the other hand, has become a safe haven for money due to its relatively controlled AI spending. It closed 5.3% higher at $349.51 on Wednesday, a record closing high and the biggest single-day rise since May 2025.
David Bahnsen, chief investment officer of Bahnsen Group, said that the market is worried about whether the huge AI investments of big technology companies can be repaid, and Apple has become an alternative option for capital transfer because it has not joined the competition to spend on the same scale.
Luke Rahbari, CEO of Equity Armor Investments, said that Apple is not dependent on building data centers to make profits. If AI manufacturing slows down, it could also reduce memory chip costs that are currently eating into its profit margins. However, Apple still expects memory prices to continue rising.
Summary FAQ
-
The market believes that limited new capacity will tighten the supply of cloud computing power. As existing players, Microsoft and Amazon can improve their pricing power and slow data center expansion expenditures, thereby improving profit margins and cash flow.
-
Microsoft, Amazon, Alphabet and Meta rose, but HUDA, Corewave and SOXX, which rely on data center expansion, fell, reflecting a market shift in favor of existing cloud platforms and targets that are less dependent on heavy capital expenditures.
-
Apple doesn’t invest in building huge AI data centers like the big cloud players, so it’s less affected by construction restrictions and capital spending pressures. If AI manufacturing slows, it could also ease the pressure on gross profits caused by the cost of memory chips.
