Updated November 5, 2026, 5:44 p.m. ET
The results of the midterm elections weighed heavily on US stocks, particularly those in data centers and artificial intelligence, as investors feared that a Democratic Congress would slow their development.
The tech-heavy Nasdaq closed sharply down 5.52%, or 1,421.516 points, at 24,314.997, putting it down more than 10% from its high last month and in what analysts call “correction” territory. Double-digit losers included Advanced Micro, Sandisk, Micron, Dell and Marvell Technology.
The broad S&P 500 index fell 4.36%, or 334.89 points, to 7,353.73 and the blue-chip Dow plunged 3.44%, or 1,833.06 points, to 51,523.06. The three major stock indexes had their worst day since April 2025.
Data center and AI stocks have fueled the bull market in recent years, but opposition to them has grown alongside affordability concerns. Consumers have seen their electricity bills rise as data centers near them suck up neighborhood electricity, studies show. Water bills come next, some researchers say, because data centers require boats full of water to stay cool.
Under pressure from lower costs for Americans, investors are bracing for newly elected Democrats across the country to pass legislation aimed at curbing the development of data centers and AI. For example, Texas Governor-elect Gina Hinojosa has pledged to halt new data center projects in one of the nation’s fastest-growing markets for billion-dollar server warehouses.
“Data center stocks have already reflected some of these potential shocks since July, but the risk does not appear to be fully priced in yet,” said Lale Akoner, global markets strategist at online brokerage etoro.
What are data centers?
Data centers play an important role in the life of every American. They are essentially gigantic warehouses that store racks and racks of servers using computer hardware to support people’s daily needs, such as cloud computing, multiplayer video games, online shopping and other digital activities. They also train AI models used to answer our queries.
On the other hand, data centers are expensive to operate. They use a lot of electricity to operate and water to cool. A single mega data center can consume the same amount of electricity as a small or medium-sized city — about 80,000 homes — daily, according to Hannah Wiseman, a law professor at Penn State Dickinson Law.
The same data center can use between 1 and 5 million gallons of water per day on a very hot day, or as much water per day as a city of 30,000 to 50,000 residents would use, the Florida Water & Pollution Control Operators Association said. The association notes, however, that newer data centers use more efficient technology that extracts water from waste and uses water more efficiently.
“The industry knows water is a critical issue and is rapidly deploying new cooling models to use less water per computing unit,” he said. “The days of free water use are numbered, due to environmental and commercial pressures.”
Data centers, AI and ripple effects
The selling was not limited to stocks related to data centers and AI, as analysts said a slowdown in those areas was impacting the economy.
“If data centers are delayed, everyone in the supply chain feels the effects,” said David Meier, senior equity analyst at The Motley Fool. Delays in building AI data centers could hurt companies’ revenues and hamper their ability to repay debt, which could hamper the AI sector as a whole.
“It’s a big deal because it’s been a big catalyst for the growth of our economy over the last couple of years.” he said. “The market might even fear that some (data center projects) will be canceled, which would be even worse. The fear is growing at the moment.”
Construction jobs, which human resources and payroll provider ADP has dubbed the “it” career of 2026, could see a decline. Data centers may make up less than 2 percent of the construction industry, but these projects have a significant “halo effect,” driving demand for residential and infrastructure labor, according to the American Institute of Architects. In May, the nonpartisan think tank Brookings estimated that data centers contributed to an 11 percent increase in local construction jobs over five to six years.
What other sectors could be affected by the midterm elections?
Besides technology, Akoner sees healthcare and defense as sectors to watch.
“In the health care industry, the impact of mid-term results will vary depending on the type of business,” Akoner said. “Efforts to protect Medicaid and restore Affordable Care Act subsidies will create an increase in health insurance coverage, which will benefit hospitals. On the other hand, new proposals to lower drug prices and tighten Medicare Advantage rules would put pressure on drugmakers and insurers.
At the same time, defense companies that rely on government contracts could be exposed if a difficult debt ceiling negotiation delays increased spending, investors fear. “This does not mean that defense budgets will decrease, but the real risk is that spending increases more slowly than expected, which would lead to price corrections,” Mr. Akoner said.
Should we buy the dip in stocks?
There could be room to buy the dip, analysts said.
“After all, in 20 out of 20 midterm elections since World War II, the S&P 500 has been higher a year later,” wrote Jim Reid, an economist at Deutsche Bank, in a commentary. And “Republican losses in the House were basically on the historical trend line of what one would expect given President Trump’s approval rating. So this was a very normal election with a very normal market reaction before and after the vote, despite fears that this time it would be different.”
But investors need to be careful about timing the markets, which analysts say is usually a losing strategy and the best method is to regularly buy fixed amounts, or dollar cost averaging, to manage risk. Using this strategy ensures that you automatically buy more shares when prices are low and fewer shares when prices are high.
“Overall, the important question for investors is what risks are already reflected in valuations and where is there still room for disappointment,” Akoner said.
Chris Larkin, managing director of trading and investments at E*TRADE at Morgan Stanley, said that “the fact that the Nasdaq Composite is hitting correction territory today does not mean the end of AI trading, but it may indicate that the trend is evolving and that traders and investors may be more selective in the future.”
(Updated with new information.)
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance advice and business news Monday through Friday mornings.
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