Investors believe that election winners in Texas and elsewhere will slap significant restrictions or even outright bans on data centers, which became a lightning rod during the campaign. After chip stocks<\/a> were among the few losers on Wednesday, they collapsed on Thursday, with the VanEck Semiconductor ETF losing 11.2%. Even industry leader Nvidia lost 9.1%, and the crash triggered a broader sell-off across the stock market, with all 11 sectors falling, even defensive ones like utilities and consumer staples. <\/p>\n Image source: Getty Images. <\/p>\n What’s happening in the data center sector <\/p>\n AI infrastructure stocks began to wobble a few weeks ago, starting with a chart showing that neocloud operator CoreWeave’s (NASDAQ:CRWV) bond yields had risen as high as 15%, and worries about a potential default sent the stock tumbling. <\/p>\n Earnings reports from the big hyperscalers were greeted similarly, as investors worried about soaring capital expenditures and negative free cash flow, even as these companies continue to grow rapidly and are hugely profitable. <\/p>\n Then, the election happened, and now fears of a slowdown in the data center build-out have led investors to flee AI stocks<\/a>. <\/p>\n Stock market reactions to elections are famously rash and often fleeting. Stocks tumbled following the Brexit decision before bouncing back over the following days, and stocks plunged overnight when President Trump was first elected before turning green the following day. <\/p>\n This looks like a similar reaction. Tech stocks initially fell on Tuesday night before the Nasdaq jumped on Wednesday. The response is understandable as data centers have been a major talking point during the campaign, but the sell-off seems like an overreaction. <\/p>\n Gina Hinojosa, the governor-elect of Texas, campaigned on a temporary moratorium on data centers and reasonable guidelines, like a ban on subsidies for data centers. However, she is no radical, telling CNN, “We will have laws to protect Texans, and we need to stop what we are doing with data centers until we have those protections.” <\/p>\n Story Continues <\/p>\n In a worst-case scenario with a significant slowdown in data center construction in the U.S., most industry observers believe that activity would just move abroad, meaning that industry growth wouldn’t be significantly impacted. <\/p>\n In an interview with the Motley Fool, Arm Holdings (NASDAQ:ARM) CFO Jason Child explained his thinking on the matter, saying, “Let’s just say it (the data centers) all slows down. Do we believe AI demand will slow down? I think, generally, most people say no. The genie is out of the bottle.” Child also said he was generally skeptical of any political reaction and said the bipartisan interest in economic growth was too strong for there to be a significant slowdown in the build-out. He also noted that Arm could still benefit from a slowdown in data center construction, as Arm’s chips excel at performance per watt, which would be in greater demand if data center construction were artificially limited. <\/p>\n What it means for investors <\/p>\n Predicting where the data center debate goes from here isn’t easy, but Child is right that demand for AI is strong and is unlikely to be shaken by any slowdown in capacity growth. <\/p>\n Meanwhile, many of the top AI stocks are looking cheaper than ever. Nvidia (NASDAQ:NVDA) now trades at a forward P\/E of less than 20, and it’s nearly doubling its revenue each quarter. Micron (NASDAQ:MU), the memory chip leader, is trading at a forward P\/E of less than 4. <\/p>\n Many of these AI stocks have already soared this year, so the pullback needs to be seen in that context, but like “Liberation Day” and other political issues that have rocked markets, this response seems likely to be an overreaction and a non-issue within the next year. Buying the dip on quality stocks like Nvidia looks like a smart move. <\/p>\n Should you buy stock in NASDAQ Composite Index right now? <\/p>\n Before you buy stock in NASDAQ Composite Index, consider this: <\/p>\n The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks<\/a> for investors to buy now\u2026 and NASDAQ Composite Index wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. <\/p>\n Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $358,037!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,229,708!* <\/p>\n Now, it’s worth noting Stock Advisor’s total average return is 897% \u2014 a market-crushing outperformance compared to 211% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. <\/p>\n See the 10 stocks \u00bb<\/a> <\/p>\n *Stock Advisor returns as of November 5, 2026. <\/p>\n Jeremy Bowman<\/a> has positions in Arm Holdings, CoreWeave, Micron Technology, and Nvidia. The Motley Fool has positions in and recommends Arm Holdings, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy<\/a>. <\/p>\n<\/a> <\/p>\n