Tech Stocks Recover Partially After Political Volatility

U.S. technology stocks made a partial recovery on Friday following a significant post-election sell-off. This downturn removed trillions from the market amid concerns that Democratic victories could slow the expansion of AI infrastructure and data centers.

The Nasdaq composite, heavily dominated by tech stocks, rose by 1.09% to close at 24,579.42. The S&P 500 also saw gains of 0.31%. However, the Dow Jones Industrial Average fell by 0.46%. The rebound recouped part of Thursday’s severe losses, which saw the Nasdaq plummet by 5.5%, the S&P 500 by 4.4%, and the Dow losing over 1,800 points or 3.4%. These three major indices experienced their worst single-day losses since April 2025, and the Nasdaq entered correction territory, indicating a fall of more than 10% from its recent peak.

Impact on Tech Giants

Companies heavily tied to the AI surge bore the brunt of the sell-off, with the so-called Magnificent Seven technology firms losing around $1 trillion in market value during Thursday’s decline.

The volatility came on the heels of decisive Democratic wins in the midterm elections. There were setbacks for data-center development at the ballot box, causing concern about potential new political barriers to the industry’s rapid growth.

AI and Data Center Stocks After Midterms

Opposition to data centers emerged during the midterm campaigns, driven by worries about electricity and water consumption, utility bills, environmental impact, and developer incentives. Newsweek reported that data centers featured in 41 ballot measures across 10 states on Election Day. Except for one, voters supported restrictions or bans on their development.

A Newsweek analysis showed members of Congress supporting data centers were more likely to lose their seats compared to opponents. While Republicans and Democrats had comparable AI policy positions, their views differed sharply on data centers. Congressional Republicans averaged a “Lean Booster” rating, while Democrats averaged a “Lean Skeptic”.

Texas was highlighted as a key player. Democratic Governor-elect Gina Hinojosa campaigned to impose an immediate moratorium on new data-center approvals, pending protections addressing utility concerns. Texas is a significant data-center market, accounting for 27% of U.S. planned data-center gigawatts, according to Wells Fargo via CNBC.

Stock Market Reactions

Concerns over possible restrictions pressured AI-related stocks on Thursday. All 11 S&P 500 sectors finished lower, but AI infrastructure companies led the losses. President Donald Trump, a strong advocate for American AI infrastructure expansion, attributed Thursday’s market decline to the election results.

On Truth Social, Trump stated the market “crashed today because the Dumocrats had a big Tuesday” and noted that Americans’ 401(k)s fell as a result. Despite Thursday’s drop, Trump remained committed to accelerating AI development.

Investment Insights

Dan Ives, from Yorkville Ives & Co., highlighted Friday that investors overreacted to Democratic victories’ potential AI impact, presenting a buying opportunity instead. He noted Thursday’s market movement was exaggerated, similar to past events such as March 2020 during COVID and April 2025’s sell-off, which provided strong buying opportunities.

Investors bought AI stocks on Friday, with Nvidia gaining roughly 3% after a 9% drop on Thursday. Micron Technology rose 5%, after a 17% plunge the previous day. AMD saw an 11% increase following a more than 17% tumble on Thursday. Tesla, Meta Platforms, and Alphabet also rebounded.

Data Center Industry Response

The Data Center Coalition reaffirmed its commitment to growth post-elections. Dan Diorio, the coalition’s executive VP of state policy and affairs, underscored the industry’s role in advancing affordability via job creation, tax revenue, and investment.

Diorio emphasized collaboration with local communities to align industry growth with community priorities. The Coalition plans to work with policymakers at all levels to promote responsible data center growth and economic prosperity.

Trump had previously suggested companies might offer dividends to communities opposing data centers to garner support. This shift reflected increasing community resistance, influencing Tuesday’s election results and signaling potential policy shifts.

Postponed White House Meeting

As the market experienced turmoil, a White House meeting with tech leaders was postponed due to scheduling conflicts. This group, including CEOs from Nvidia, Meta, and AMD, was expected to advise the President’s new AI task force. The broader question remains whether the political backlash will significantly slow AI infrastructure development or if the market’s response was an overreaction manageable by the technology industry.

Friday’s partial rebound indicated that some investors are optimistic about AI’s future, though major indices remained below pre-Thursday levels.