Palantir and CrowdStrike Fall Nearly 10% on Nov. 5 Amid AI Regulation Fears
Key Facts
Shares of Palantir and CrowdStrike each fell nearly 10% on Thursday, Nov. 5, 2026, in a session when the Nasdaq Composite dropped 5.56%, its steepest daily decline in 19 months, according to Yahoo Finance and Reuters. The selloff came as investors worried that Democratic gains in the elections could lead to restrictions on the expansion of AI infrastructure. Reuters said some members of Congress and newly elected governors are seeking to slow its development. For Palantir, the drop wiped about $40 billion from its market value during the session. Yahoo Finance described it as the stock’s worst day since February.
The political concern centered on the expansion of data centers and the associated demand for electricity and impact on local communities. The Associated Press reported that most of the winning candidates covered in its report supported tighter regulation or a temporary pause on some projects. Of 34 winning gubernatorial candidates in races the agency called, 32 supported tighter regulation or restrictions, while 12 backed bans or temporary pauses. At the local level, restrictions on data centers were approved in 44 of 45 ballot measures with complete results in the agency’s analysis. Reuters noted legislative calls to protect consumers from rising electricity bills linked to data centers, as well as demands for independent testing of AI systems.
The election campaign reflected growing sensitivity to the construction of these facilities, with spending on television ads that addressed data centers exceeding $380 million during the midterm election season. Democrats spent more than three times as much on the issue as Republicans, according to data cited by the Associated Press. A poll by the agency found that about three-quarters of U.S. voters oppose building a new data center in their communities. About a quarter of voters said AI data centers were a decisive factor in their vote for Congress. In this context, Gina Hinojosa, Texas’ governor-elect, pledged to halt the construction of new data centers, Reuters reported.
Regulatory concerns were not the only factor behind the reassessment of AI stocks; the cost of data centers and related infrastructure also raised questions about future returns. Reuters quoted a market research analyst saying investors are watching efforts by newly elected officials to slow infrastructure development, which could weigh on the rapid expansion that has supported AI growth. The agency also linked caution to the cost of these facilities and other infrastructure, and the possibility that they could limit future returns. OpenAI published a framework on Thursday that included commitments to communities where it develops data centers. The company called on policymakers to set clear rules for how the industry builds these facilities, as local and political demands for companies to be held accountable for the effects of expansion intensify.
EL7 data showed the two stocks took different paths in the next session: Palantir closed at $154.99 on Nov. 5, then rose to $160.38 on Nov. 6. CrowdStrike closed at $217.20, then fell to $216.90 the following day. The nearly 10% drop therefore did not recur in the Nov. 6 session, although CrowdStrike shares remained slightly lower. In the broader market, the S&P 500 rose 0.31% and the Nasdaq gained 1.1% on Friday, Nov. 6, according to Reuters. But the three major U.S. indexes posted weekly losses despite the rebound.
Company results provide further context on commercial growth in the sector as investors reprice risks. Palantir said in its third-quarter filing that its U.S. commercial revenue rose 148% year over year and 29% from the previous quarter. The company added that U.S. commercial revenue exceeded government revenue for the first time in its history. In its second-quarter fiscal 2027 results announcement, CrowdStrike reported that revenue rose 26% to $1.47 billion, while annual recurring revenue increased 25% to $5.84 billion as of July 31, 2026. The company also raised its fiscal 2027 forecast for growth in net new annual recurring revenue to 34% at the midpoint of its range.
Upcoming legislative steps and political developments remain in focus after campaign pledges to restrict some aspects of expansion. Reuters said Hinojosa pledged to halt construction of new data centers in Texas, while Democrats in Congress called for measures addressing electricity costs and testing of AI systems. OpenAI, meanwhile, called for clear rules and published a framework outlining its commitments to host communities. On the company front, CrowdStrike set Dec. 1, 2026, for its fiscal 2027 third-quarter earnings conference. The announcement could be a near-term opportunity to update investors on the company’s performance after the selloff.