Intel Shares Fall 7.3% as Investors Reassess Data Center Expansion Risks
Key Facts
Intel shares fell 7.3% at 1:43 p.m. Eastern time on Thursday, November 5, as investors reassessed the impact of Democratic midterm election victories on plans to build AI data centers, according to a Motley Fool report. The decline came amid a sharp selloff in technology and AI stocks, Reuters reported, saying chip stocks posted their second-largest drop ever. Intel closed at $52.25 on November 5, after closing at $58.27 in the previous session, according to EL7 data. This places the close on the day of the news in its proper context, following a higher close for the stock on November 4. Investors’ concerns center on the possibility that political and regulatory restrictions could slow the expansion of infrastructure supporting AI growth.
The decline spread to the broader market, with the Philadelphia Semiconductor Index falling 12% during the November 5 session, its second-largest drop ever, according to a Reuters summary. The Nasdaq fell 5.5% and the S&P 500 declined 4.4% in the same session. These moves show that pressure was not confined to Intel shares but extended across chip stocks and technology and AI shares more broadly. Reuters linked the selloff to investors’ reassessment of the implications of Democratic gains for AI data center construction. The S&P 500 had risen 1.6% on November 4, its best session in three months, according to the Associated Press.
The election results heightened concerns that political positions could become obstacles to infrastructure projects. Democrats won 7 Senate seats, gained at least 39 House seats and won five governor’s offices, according to Reuters. In Texas, Gina Hinojosa, the Democratic governor-elect, pledged to halt approvals for all data centers until the legislature enacts laws to protect residents. In a video posted on October 22, she said: "When I take office as governor, I will issue an order to pause, meaning ban, all data center approvals until the legislature can enact laws to protect Texans." Hinojosa is due to take office on January 19, while Texas Tribune coverage said the suspension of approvals could continue until new laws are enacted in the state next year.
Debates in Washington extend beyond local approvals, as congressional Democrats have called for legislation to protect consumers from higher electricity costs linked to data centers and for independent testing of AI systems, according to Reuters. Melissa Brown of Semco said some members of Congress and governors-elect are seeking to slow AI infrastructure development. She added that any slowdown would raise concerns because the AI growth story has relied heavily on rapid expansion of supporting infrastructure. This helps explain why chip stocks are sensitive to developments involving data centers, as investors watch for the possibility that restrictions could affect the pace of spending and construction. The Texas step remains tied to state decisions and approvals, while the calls in Congress concern potential federal legislation on electricity costs and AI system testing.
Intel shares also face a separate political issue involving the U.S. government’s stake in the company. The Motley Fool said the government bought a 10% stake last year for $8.9 billion. The report said Democrats questioned the deal and that another round of hearings remains a possibility. This issue comes alongside concerns tied to data centers, but involves government ownership and oversight of the deal. In Texas, the next date that could determine how long the approval suspension lasts is the legislature’s January meeting, with any lifting of the suspension tied to the enactment of new state laws.