AI Company Stocks Drop Amid Threat of Data Center Construction Slowdown
The Nasdaq 100 index lost over 6%—its worst performance since 2020. Investors fear political pressure will slow the construction of AI data centers.
The market for companies tied to artificial intelligence found itself among the hardest hit during a widespread stock sell-off. Chip manufacturers and cloud companies, which are involved in building AI infrastructure, experienced the steepest declines.
One of the risks is linked to the potential increased influence of Democrats. If they tighten permitting processes, begin scrutinizing electricity and water consumption more closely, or reduce tax incentives, new data centers will take longer to build and become more expensive. UBS estimates that construction delays could impact around 30% of the planned growth in data centers by 2028.
Such a scenario would affect the entire supply chain: chip manufacturers may lose orders, energy equipment suppliers could see fewer projects, and data center developers will struggle to justify large expenditures, particularly when reliant on debt financing.
There is another interpretation. A slower construction pace could give the largest cloud companies more time to demonstrate returns on capital expenditures to investors. Developers will likely become more selective with projects, and the market may shift further toward financially stable companies capable of independently funding energy supplies and withstanding delays.
The sell-off demonstrated that investors currently perceive political shifts as a threat to the AI market. However, a slowdown in construction does not necessarily mean abandonment: it could transform the capital expenditure race into a more organized process with greater focus on profitability.
