Memory stocks, including Micron Technology, SK Hynix and SanDisk, fell on Wednesday as investors reassessed the outlook for artificial intelligence infrastructure spending following a wave of Democratic victories in the US midterm elections.
Micron shares MU declined more than 6.7%, while SK Hynix lost close to 5.4% and SanDisk fell over 8%.
The weakness contrasted with a broad rally across US equity markets, with the S&P 500 rising 1.8%, the Dow Jones Industrial Average gaining more than 2% and the Nasdaq Composite advancing 2.5%.
Some data centre-related stocks came under pressure as Democrats made gains in key markets for infrastructure development, including Texas and Georgia, where opposition to the industry’s rapid expansion has been growing.
Texas election result raises data centre concerns
Investors had largely anticipated a Democratic victory in the House of Representatives and the possibility of the party taking control of the Senate.
However, the Democratic victory in the Texas gubernatorial race emerged as a major concern for technology investors.
Democrat Gina Hinojosa defeated incumbent Republican Governor Greg Abbott after campaigning for an immediate moratorium on new data centres in the state.
Texas is central to the US data centre expansion, accounting for about 27% of planned data centre capacity, according to Wells Fargo.
Dan Ives, partner at Yorkville Ives & Co., said the election results could slow the pace of data centre construction across the country.
“There is no way to sugarcoat that Democrats taking control, especially over the Senate, will create some major hurdles for AI and tech legislation in the Beltway over the next 2 years,” he said in a note on Wednesday.
Ives described the Texas result as the “biggest worry” of the night for technology investors and the AI trade, given that the state could account for around 25%-30% of planned data centre gigawatts and capacity.
Goldman Sachs economists also warned that political changes could affect infrastructure investment.
“Democratic wins at the state and local level are likely to lead to short-term data center moratoria, potentially affecting about 45% of planned US data center capacity expansion,” they said in a note.
A slowdown in data centre construction could eventually temper demand for memory chips, which are essential components in AI servers, potentially easing pricing pressure for manufacturers.
Wednesday’s reaction a valuation “reset”?
StoneX’s Cody Acree told MarketWatch that “the Texas AI buildout remains intact and exceptionally large, even if the political headwinds are shifting toward more uncertainty regarding planned project approval.”
He described Wednesday’s market reaction as a valuation “reset” across the technology sector, rather than a sign that data centre demand or construction plans for 2027 had suddenly weakened.
However, he warned that policy uncertainty could pose a bigger long-term risk if investors begin to believe that regulatory hurdles, project approvals or rising costs could constrain the expansion of AI infrastructure.
“That matters because most chip stocks are valued based on the assumption of several years of nearly uninterrupted growth,” he added.
The decline comes a day after memory stocks gained ground following comments from Apple CEO John Ternus, who described the current memory-pricing environment as “unprecedented”.
Apple warned that rising memory costs would put pressure on gross margins and said the increase was likely to persist beyond the December quarter.
Yardeni Research has also said memory manufacturers are sold out into 2029, reflecting strong demand from AI infrastructure developers and constrained supply.
Chinese competition also remains in focus
The longer-term outlook for memory makers has also faced increasing competition from China’s CXMT.
CXMT is pursuing an alternative chip architecture that Micron has chosen to bypass, highlighting differences in how manufacturers are seeking to increase memory density amid cost and geopolitical constraints.
The Hefei-based company plans to send customers samples of its first server-grade dynamic random-access memory (DRAM) product using the 4F² architecture by the end of this year, according to a summary of its latest earnings briefing released on Saturday.
The development has intensified questions about whether Chinese manufacturers could compete in higher-value server memory, rather than focusing primarily on lower-end products.
Last month, Morningstar equity analyst Jing Jie Yu said CXMT’s announcement had disrupted investor expectations around technology development timelines and heightened concerns about the accelerating pace of lower-cost Chinese technologies that could disrupt leading AI firms.
“If the company can commercialize this technology ahead of its peers, it speaks volumes to China’s DRAM technological competitiveness and raises risks of oversupply longer term given the country’s rapid expansion in DRAM capacity,” he said.
CXMT has not disclosed a timeline for mass production, saying commercial rollout would depend on customer validation and market demand.
In a research note on Wednesday, BofA Securities said the 4F² architecture offered an alternative route to higher memory density without requiring extreme ultraviolet (EUV) lithography tools.
Successful volume manufacturing could strengthen CXMT’s competitiveness, the bank said, while warning that the technology also carried higher costs and execution risks.
For investors, the combination of potential delays to AI infrastructure projects and emerging Chinese competition adds fresh uncertainty to a memory market that has benefited from tight supply and surging demand.
AI disclosure: AI tools assisted with research and drafting of this piece. An Invezz editor reviewed the facts, sources and wording before publication. Any opinions or analysis are Invezz’s, not those of an automated system.
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