US STOCKS-Wall Street rises after Democrats win Congress; data center stocks tumble

By Noel Randewich and Shashwat Chauhan

Nov 4 (Reuters) - Wall Street rose on Wednesday as Democrats' sweeping midterm election victory eased political uncertainty and boosted risk appetite, though data center shares slipped on fears of tighter AI regulation.

Democrats seized control of both the Senate and House of Representatives, scoring wins in Republican strongholds for the first time in generations in a voter backlash against President Donald Trump.

The prospect of fewer sweeping legislative changes lifted some large technology stocks, while companies tied to the AI infrastructure buildout fell.

"Stocks are sharply higher today as election clarity reduces uncertainty," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis. "The election introduces a degree of gridlock to the economic backdrop and that oftentimes is favorable for equity prices, and we are seeing some of that today."

AI HEAVYWEIGHTS RISE, DATA CENTER OPERATORS FALL

AI stocks were split. Shares of cash-rich AI heavyweights rose, while chipmakers and data center operators fell after Democrats made gains in key data center states including Texas and Georgia, where public opposition to the industry's rapid expansion has been growing.

The move reflected expectations that a slowdown in expanding AI infrastructure could ease cash demands on tech companies, while pressuring operators and suppliers, whose growth depends on a rapid buildout.

"It's pretty clear that the AI trade will face some headwinds there ... If you push out the pace or change the pace of the data center buildout, you begin to change the fundamental trajectory for many of those suppliers," said Scott Chronert, head of US equity strategy at Citi Research.

Amazon.com AMZN.O jumped 7%, while Meta Platforms META.O added 1.3% and Alphabet GOOGL.O gained 3.8%.

Shares of data center operators IREN IREN.O and Hut 8 HUT.O dropped 12% and 24%, respectively, while Applied Digital APLD.O and Core Scientific CORZ.O also tumbled.

The Philadelphia SE Semiconductor index .SOX fell 3.6% to a six-month low.

AMD AMD.O was down 0.4% after forecasting faster-than-expected 2027 growth as its data center sales surged.

The AI trade has come under some pressure recently as investors grow more concerned over Big Tech's soaring AI spending. The tech-heavy Nasdaq-100 .NDX index confirmed on Monday it was in a technical correction.

The S&P 500 .SPX jumped 129.94 points, or 1.72%, to 7,698.86 points, while the Nasdaq Composite .IXIC gained 449.12 points, or 1.77%, to 25,821.13.

The Dow Jones Industrial Average .DJI rose 1,534.89 points, or 2.97%, to 53,321.61.

All but two of the S&P 500 sector indexes rose, with consumer discretionary .SPLRCD jumping 5%. Energy .SPNY fell 5.1%.

The dollar weakened against most currencies and yields on long-dated Treasuries moved lower.

Elon Musk-led SpaceX SPCX.O and Tesla TSLA.O were among the laggards, down 4.6% and 2.2%, respectively. Musk spent nearly half a billion dollars backing Republican candidates, including efforts to keep Republicans in control in Texas, the home state of both companies.

Defense stocks Northrop Grumman NOC.N, RTX RTX.N and Lockheed Martin LMT.N fell as Trump's $1.5 trillion defense budget request could now face a tougher road in Congress.

Solar and clean energy stocks rose, as investors bet a Democratic sweep would help keep federal support for clean energy development in place. The Invesco Solar ETF TAN.P climbed 6.1%.