The Democratic Party in the United States swept both houses of Congress in the midterm elections, raising concerns in the market about the future of data center construction in the U.S. However, Nomura Securities believes that the net impact of this political change on China's AI economy may actually be positive.

According to reports from the trading desk, economists Ting Lu and Jing Wang at the firm pointed out in a report released on November 6 that the Democratic "blue wave" will slow the expansion of U.S. data centers through measures such as tightening regulations and protecting electricity prices, thereby triggering a drop in global AI chip prices and alleviating the pressure on Chinese enterprises in acquiring high-end chips. "We expect that the overall Chinese AI economy will significantly benefit from America's blue wave," the report stated.

The market reaction has already indicated the issue. Within two trading days after the election results were announced, the Nasdaq Composite Index fell 5.5% on the second trading day, marking the largest single-day drop in 18 months; the Philadelphia Semiconductor Index (SOX) plummeted nearly 15% over two days. Nvidia saw a total decline of about 12% over two days, Micron Technology dropped about 24%, while SK Hynix and Samsung Electronics fell by 9.5% and 7.5%, respectively, on the Korean KOSPI market, triggering automatic circuit breakers.

Morgan Stanley also cautioned in a report at the same time that the Democratic Party's control of Congress does not mean a substantive easing of U.S.-China relations, but it does enhance policy predictability. In terms of AI investment strategies, the firm is more optimistic about China's "self-controlled" direction rather than relying on export chains linked to global AI capital expenditure.

U.S. Data Center Construction: Stricter Regulations, Stalled Expansion

The immediate impact of the election results is that U.S. data center construction will face stricter policy constraints.

According to the Nomura report, the Democratic Party won governorships in several key states for data center construction, with the new leadership emphasizing consumer electricity burdens, energy affordability, and corporate accountability in their campaigns. This means that data center developers will no longer be able to pass the capital costs of upgrading the grid, expanding transmission, and adding power generation onto residential users, placing the financial burden directly on the developers themselves.

The firm pointed out that stricter municipal regulations, the prohibition of signing confidentiality agreements during early site selection phases, and mandatory clean energy procurement requirements will replace the previous rapid industrial development model. "The time required for a newly built large-scale data center from site selection to grid connection will be significantly extended," the report stated.

Currently, the scale of data center construction in the U.S. is vast. According to Cleanview tracking data, there are over 4,500 data centers distributed across more than 1,500 parks in the U.S., with approximately 1,418 operational, 564 under construction, and another 2,555 in the planning stage. Data from commercial real estate company Cushman & Wakefield shows that the current construction capacity has reached a record 37.7 gigawatts, with planned pipelines reaching as high as 285 gigawatts.

Chip Price Decline: An Unexpected Boon for Chinese Data Centers?

For China, the most direct benefit from the slowdown in U.S. data center construction is the reduction in the difficulty of acquiring AI chips and relief from price pressures.

The firm noted that "When U.S. cloud giants aggressively expand data centers, they stockpile the production capacity of global GPUs, HBM, and advanced logic chips, tightening global supply and driving up premiums for restricted hardware in black markets and secondary channels."

Once U.S. data center capital expenditures slow down, this situation will ease. The firm believes that Chinese AI companies, cloud service providers, and research institutions will be able to obtain relevant GPUs, HBM modules, and advanced packaging materials more easily and at lower costs through intermediate trade hubs.

Analysts pointed out that during the peak of U.S. data center construction, the related premiums for advanced GPUs and HBM modules in Asian logistics hubs often reached 200% to 300% of the standard price. As Western demand cools, "these speculative premiums may collapse significantly, allowing Chinese buyers to acquire computing hardware at more reasonable prices."

At the infrastructure level, China is promoting a state-led national AI data center network construction, with plans to invest about 2 trillion yuan (approximately $295 billion) in the 15th Five-Year Plan, aiming to integrate dispersed regional computing facilities into a unified interconnected network by 2028, primarily operated by state-owned telecommunications giants like China Mobile and China Telecom. Unlike the local resistance faced by U.S. grid construction, China relies on the "Eastern Data, Western Computing" project, coordinated by the State Grid, allowing computing hubs in the western regions like Guizhou, Inner Mongolia, Gansu, and Ningxia to access low-cost renewable energy directly without dealing with residential electricity disputes or grid connection queues.

Morgan Stanley: Favoring Localization and "Self-Sufficiency" Themes in China

Morgan Stanley provided supplementary perspectives on the aforementioned logic in its report at the same time, but with a more cautious tone.

Strategists Laura Wang and Vicky Wu pointed out that the Democratic control of Congress should not be interpreted as a substantive easing of U.S.-China relations. "We believe that strategic competition and geopolitical uncertainties will continue to exist."

The strategists believe that the potential positive impact of this election lies in the increased predictability brought about by policy constraints. Congressional checks and balances will make it more difficult for large-scale unilateral policy shifts, reducing the likelihood that tariffs will become the primary bilateral policy tool subject to frequent upgrades.

The firm suggested distinguishing between two types of Chinese AI trades: beta exposures in the global AI supply chain (such as optical transceivers, which primarily follow global AI capital expenditures and U.S. policy reviews), and themes of localization and self-sufficiency in China.

“We prefer self-sufficiency trades—these operate within the framework of China’s national policy priorities and enjoy support from both supply and demand.” Analysts believe that the ongoing bipartisan tech competition with China will only strengthen domestic policy commitments to technology independence, covering semiconductors, computing power, electrical equipment, and domestic AI infrastructure.

Moreover, the firm noted that compared to the market's excessive focus on AI trades in the first half of 2026, the current investment opportunities in the Chinese stock market are more balanced, covering consumer and industrial exporters, downstream sectors sensitive to oil prices, healthcare/biotechnology, and green energy sectors. The report also indicated that the current valuations in the Chinese stock market are around 10% near historical absolute lows, and various funds have recently significantly increased their buying power in A-shares.

Increased Risk of Data Centers Migrating Out of the U.S.

Additionally, there is a popular view that as domestic regulations tighten in the U.S., there may be a risk of data centers migrating abroad.

Recently, All-In Podcast co-hosts Jason Calacanis, David Sacks, and David Friedberg warned in the program that if states continue to set approval barriers, data center projects valued at over $50 billion may be forced to relocate to Canada, Mexico, Malaysia, or even the Middle East, with the U.S. shifting from a "global computing power exporter" to an expensive "token importer," which could have a significant strategic impact on technological competitiveness and employment.

Analysts pointed out that the "blue wave" has instead made orders in the Asian computing power industry more certain and performance more predictable.

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