We've had an interesting split the past couple of days…
Most AI infrastructure stocks are down BIG
And yet Amazon and Microsoft both showed relative strength…
This week’s election handed Democrats the House and the Senate, plus the governor’s mansions in Texas, Ohio and Georgia.
Data centers were a key campaign target, and investors now expect more roadblocks to new construction.
So naturally the knee-jerk trade was to dump anything related to AI or the AI infra buildout… which is why we saw semiconductors down 10% on Thursday
But the real answer is more nuanced…
Because look at what the market has been worried about lately…
Building enough capacity looked so expensive that even the winners might end up far less profitable than promised…
And rising borrowing costs on AI projects led to these stocks sliding in recent weeks.
But a slowdown shrinks that bill… because it leads to fewer projects competing for the same supplies.
Meaning that if you already own a working data center, every project that gets blocked makes yours more valuable.
It’s like owning a house in a town that just froze new building permits.
Your neighbors waiting to build are stuck… but you still have your roof, and the line of buyers just got longer.
The bond market agrees - Nvidia and Broadcom shares fell while their bonds rose.
Lenders to data center projects for Microsoft, Amazon and even CoreWeave got more comfortable too, accepting a smaller premium over US government bonds. And when lenders accept less extra interest… it’s because they feel safer about getting paid back.
So if the race continues at a slower speed, the biggest and most experienced players win more share.
I first recommended Microsoft to readers at around $230, and nothing in this week’s result changes why.
Oliver