Thursday's selloff in hyperscaler and neocloud stocks deepened as investors reassessed the mounting risks that the Democratic sweep in the US midterms poses to the AI infrastructure boom. By midday in New York, the Nasdaq was down more than 5%, while Morgan Stanley's neocloud index had plunged 12%, reflecting concerns that Democratic-led moratoriums could delay projects, disrupt spending plans, and even undermine the US economy. We've extensively detailed where state-level restrictions could put the buildout most at risk (read here and here).

Earlier today, the doom headlines started pouring in. The Wall Street Journal reported that OpenAI leaders were discussing whether to reset expectations for next year's data center buildout after the blowout election results signaled dire straits for the AI boom.

WSJ said AI insider concerns surfaced Tuesday night at San Francisco's Opera House, where Nvidia CEO Jensen Huang hosted executives for "The Marriage of Figaro." Attendees discussed how midterm election results and mounting local opposition could put immense pressure on the planned expansion of computing capacity.

We've repeatedly warned about the implications of what follows a Democratic sweep. More specifically, Goldman highlighted the exposure of the US data center buildout to the blue wave, as Democrats won governorships in Texas, Ohio, Nevada, Georgia and Michigan, while gaining a trifecta in Pennsylvania and likely Arizona.

"The states where Democrats are likely to further restrict data centers account for roughly 45% of planned US data center capacity, with Texas alone accounting for roughly 25%," Goldman said.

This chart shows the states Democrats won and how much of the planned buildout could be at risk.

Economists view the data center buildout and grid expansion as among the largest economic drivers under the Trump administration's reindustrialization strategy for the US economy, accounting for an estimated 25% of total growth this year alone. Disrupting the construction boom could have severe consequences beyond plunging tech and chip stocks. It could translate into local economic turmoil if Democrats implement restrictions state by state, particularly in newly blue Texas.

With all this turmoil unfolding, we want to examine who owns the data center moratorium narrative. To no one's surprise, a key pillar of the Democratic Party's midterm campaign has been to stop President Trump's reindustrialization at all costs, even if that means crashing stocks and the economy.

The largest and most high-profile anti-data-center push came from the known socialists in Congress. Representative Alexandria Ocasio-Cortez and Senator Bernie Sanders pushed for a nationwide moratorium from late 2025 into the 2026 midterm race. Representative Frank Pallone later endorsed a federal pause, adding to the ranks of Democrats seeking to derail the economic revival.

AoC and Bernie kicked off the "data center moratorium" narrative in late 2025. Dems ran with it. 

The headlines speak for themselves:

At the state level, particularly in Texas, Governor-elect Gina Hinojosa has pledged to continue pausing approvals until lawmakers adopt new protections. Ohio's Amy Acton has advocated a conditional moratorium, while Georgia’s Keisha Lance Bottoms has called for a statewide pause to assess the industry's effects on communities.

Other Democratic governors have already acted. New York Governor Kathy Hochul imposed a permitting pause on new hyperscale facilities in July. Oregon Governor Tina Kotek expanded restrictions on projects. 

More headlines showing who owns the data center moratorium narrative:

Republicans have also backed restrictions but to a lesser degree. Michigan Senate candidate Mike Rogers supported a one-year statewide moratorium, while Democrat Abdul El-Sayed advocated local and state pauses. In Ohio, Republican Vivek Ramaswamy urged a temporary halt to approvals. 

So the moratorium narrative came from socialist Democrats, then some Republicans jumped on the bandwagon as they saw this topic was near and dear to voters. 

Beyond Democrats trying to crash the Trump economy, because that really is the end goal, they've also said since the election that they want revenge for Trump nuking all things DEI in what will be years of endless lawfare. Amplifying the anti-data center rhetoric was a far-left China-linked NGO sympathetic to Democrats, and oddly enough. 

All in all, Democrats own the narrative. Instead of being pro-growth and growing the US economy out of a debt trap, the party that has embraced far-left socialist DSA is willing to crash not just stocks but the economy over their hatred of Trump. 

... and what comes next will be an information war over who gets the blame for the deflating bubble.