In this post we offer a look beyond SOXX yesterday and try to situate where we are in the cycle.
Stocks finished higher after the Democratic midterm sweep, but the tape stayed selective underneath.
The S&P 500 closed +1.58%, the Nasdaq 100 +0.91%, the Dow +3.03% (its best day since April 2025), the Russell 2000 +1.58%.
Election uncertainty is largely out of the way, bonds bid, and oil cratered (WTI –8.3%, Brent –8.7%). The market is still making aggressive bets on what a new political regime means for AI infrastructure. Investors aren’t abandoning equities; they’re aggressively rethinking where they want to own risk.
AI’s positive earnings momentum got overwhelmed. Semis opened higher on AMD but the group reversed hard; SOX finished –4.74%. AMD itself held a small gain (+0.3%) after giving back a ~7% pre-market pop. AI Tech Beneficiaries and DRAM names stayed under pressure. Micron –4.9%, Intel –4.3%, Nvidia –1.6%, Broadcom –1.7%. Investors are not convinced the AI unwind is done.
The AI power/scarcity trade took a heavy hit. Data-center builders, power names, and Bitcoin miners closed with double-digit losses in many cases: GE Vernova –9.3%, Vistra –13.8%, Comfort Systems –15.1%, Hut 8 –23.2%.
The Democratic sweep, especially the Texas outcome, raised concerns about tighter permitting and regulatory scrutiny — governor-elect Gina Hinojosa has pledged a moratorium on new data-center approvals, and Texas holds roughly 27% of US data-center gigawatts.
Importantly:
A moratorium on data centers would not apply to those that have already received approval; it would target new projects. (Link)
Requirements for new data centers include: the inclusion of U.S. union labor, local-level approval, self-sufficiency regarding electricity and water (ensuring no impact on utility costs for residents), a prohibition on the use of non-disclosure agreements (NDAs), the elimination of subsidies, and a guarantee that community water supplies remain unaffected.
Most existing data center capacity is held by CSPs, while most new capacity in Texas is being added by neoclouds. CIFR -20% while Microsoft +6.7%.
Housing-related names, airlines, homebuilders, retail, restaurants, and broader Discretionary (XLY +4.26%). Homebuilders ITB closed +7.6% and XHB +5.5%.
Lower yields and oil well below $100 gave real relief to rate- and oil-sensitive groups that had been sources of funds during the AI boom.
Energy (XLE) finished –4.74%. The market is cutting the geopolitical risk premium in oil on the view that the midterm results reduce the odds of further US escalation with Iran.
So where does this leave us? As usual, the readers of this newsletter have been very helpful: