Shares in the biggest US technology companies rose sharply on Wednesday after Democrats won the midterm elections. Investors bet that limits on new data centres would help the large firms, Reuters reported.
Amazon shares climbed 7.4% to a three-month high. Meta Platforms, Alphabet and Microsoft gained between 2% and 6.3%, leading a rally on Wall Street.
Apple jumped nearly 7% to a record high. The company has avoided the heavy AI spending of its rivals. But it has been hurt by rising memory chip prices linked to the AI boom.
“The hyperscalers already have data centres, so those assets are more valuable now because there’s not going to be an overbuild of data centres,” said Art Hogan, chief market strategist at B Riley Wealth.
Hogan said a slower pace of building would also mean slower spending by the large cloud companies. “That certainly would impact the hyperscalers,” he said.
The rally came after several days of selling. Investors had been worried about the rising cost of the race to build AI systems.
Recent quarterly results showed how that race changed the big cloud companies. Firms that once had lots of cash and little debt now spend heavily and borrow more. Microsoft was the main exception, with $18.6 billion in cash flow.
Democrats who oppose data centres won by large margins in several races, including in Texas, according to Reuters. Data centres use a lot of power and water and can be noisy. They have become less popular with local communities.
“The biggest worry of the night for tech investors and the AI trade was around the state of Texas,” said Dan Ives, senior MD and tech analyst at Yorkville Ives. He said about 25% to 30% of data centre capacity will come from Texas.
“Now it will happen at a more measured pace, which is likely a good thing in the eyes of many investors,” Ives said.
The large tech companies plan to spend more than $740 billion this year on new computing capacity. That is up from about $400 billion last year, Reuters reported.
Their spending is far higher than that of smaller AI cloud companies such as CoreWeave and Nebius.
Shares in smaller players fell on Wednesday. Applied Digital and Iren dropped between 6% and 13%. Investors feared that limits on building could hurt their expansion plans, which rely on borrowed money.
These smaller companies have been spending several times their revenue. They are trying to meet a growing list of orders from customers, according to Reuters.
Source: this article is based on reporting by TechCentral. Image: TechCentral. Written with the help of AI and published by the Tzaneen Voice Technology desk. See our Editorial Standards.
Werner Jacobs covers technology for Tzaneen Voice. Werner reports on mobile networks, data prices, internet access, smartphones, apps, AI, cybersecurity and South African tech companies. Each story explains what a new product, price change or policy means for ordinary users in South Africa.