With the end of the Trump era comes the end of the AI/data center grift, which was a scheme to create wealth for the few, the illusion of prosperity for the many via the stock market and to give cover to otherwise reckless policies of wars, inflation, pollution and corruption.
— Marko Kolanovic, November 5, 2026
I wish I had a more original joke but… well, “the chips are down.”
Mid-week optimism around the US election read-across for hyper-scaler free cash flow morphed by Thursday into what looked like panic-selling in semis, which were beaten like a red-hatted stepchild on a blue moon in November.
Amid the carnage, which had the SOX on track for its second-worst day of the year (and its third-worst since 2020), the financial mediasphere was awash in generic “stay invested” exhortations. Like this one from somebody I’ve never heard of at UBS: “Stay invested in diversified equities.” (Thanks, Ulrike. That’s why you get paid the big bucks.)
There’s the SOX. It’s now erased a very large chunk of the vertical rally which saw the semi gauge almost double from the late-March lows to the June bubble highs.
Before anybody asks, yes, I bought some. Just the “dumb” ETF. Two words of caution before you get any ideas. First, I had some extra budget to play with thanks to the Nike success, so this was a “free” trade. Second, semis may be a falling knife, at least in the near-term, and as such I plan to hold this position for a long time. I’ve been looking for a chance to buy semis broadly since the delirious spring/summer run-up, and a 40% drawdown’s a decent discount, in my view. Not investment advice.
Thursday’s chip selloff is the other side of Wednesday’s hyper-scaler rally. If AI capex slows, and Democrats put the brakes on the data center buildout, then some of the more aggressive assumptions around semi earnings may need to be revisited.
That’s a potential problem, and not just for chip names. As a reminder you shouldn’t need, S&P 500 earnings growth’s heavily reliant on semis. That much isn’t up for debate.
But it gets pretty murky, pretty quick after that. The nuance matters: This is mostly a margin story. It’s clear enough why the blue wave might slow the pace of the AI buildout, but it’s less clear why it should erode profitability.
The figure above shows you the inflection in margins. It’s more pronounced in memory names than for semis more broadly. (Remember: The memory business is famous for booms and busts.)
When you factor in the rather sharp de-rating implicit in a 40% drawdown for the space and the lack of a straight-line connection between the election results and chipmaker margins, it’s not obvious to me that chips as a group deserve to be hate-sold.
It’s possible — and readers are more than welcome to weigh in on this because God knows I’m no expert — that if demand’s delayed for too long, some semi names could get stuck staring at a temporal mismatch between outlays to boost capacity and revenue, which could conceivably impact near-term margin forecasts.
But at the end of day, there’s still a lot of pent-up demand. As long as demand outstrips supply, chip prices (i.e., prices for the hardware itself) should remain supported, right? Wrong? Hell, I don’t know. SK Hynix’s ADRs traded at a new post-debut low on Thursday.
While I’m (more than) on board with the notion that a company whose shares rose 350% from January to July on its home exchange was overdue for a big correction (and do note that I was very vocal about SK Hynix having waited too long to list in the US when it pulled off the largest-ever American debut for a foreign company over the summer), I haven’t seen much to suggest the market for HBM’s going to balance anytime soon.
I noticed JonesTrading’s Mike O’Rourke landed in some of Thursday’s mainstream media coverage. As you can imagine given his penchant for — how should I put this? — plain speaking, Mike was adamant that the election will almost surely impact bottom-lines, or at least earnings growth forecasts.
“Investors have no idea where [earnings] estimates will reset,” he told Bloomberg, hours after delving into more detail in his post-election evening mailer. “This is all about the governors’ races,” he wrote. “The blue wave in Congress simply strengthens the local mandate to slow [data center] construction.”
In the same note, O’Rourke mentioned the circular deals at the center of the global leveraged buildout. “Would [memory] prices have increased 10x over the past 14 months if the chipmakers had not been financing the transactions?” he wondered.
It was a rhetorical question.
Also, per BBG, vol control funds are expected to sell $135BN futures in next day/two.
yep, they figured out those articles are good for a lot of clicks. “Twiggy, if you get a dunk tonight try to break that backboard, all right? We’ll get that on the news.”
Thanks for the timely comments from H and commenter J.L. In.
Seems like it’s been a while since I’ve seen a quote from Marko here. I don’t know that I’d call the AI/data center buildout a grift (certainly not in the same way I’d describe basically every other action from this administration), but he’s not wrong about creating wealth for the few.
I agree with you though that this seems overdone. The SOX is not far from the range it was in at the start of the year before massive upgrades in growth projections, and I suspect the impact of the elections will not be as meaningful to data center construction (at least in the near term) as markets seem to expect.
If they’re looking for new real estate, there’s always Florida! How hard can it be to hurricane-proof a data center?
I’m inclined ot agree, re: impact on data center construction –
“Gina Hinojosa beat Republican Greg Abbott in the race, and she has called for a moratorium on new data center projects until there are protections in place for electricity supplies and other resources.”
Note, the UNTIL qualification. Pretty sure we’ll see more like this. Not to be too cynical, but people forget Dem politicians also love money – for their domains’ economies, their constituents, and themselves. Maybe not as grossly grifting as MAGA-world, but, hard to see that plenty of data centers won’t find homes. Some may have to be in orbit or on the moon (thanks, Elon), in more red states or other countries (Argentina, Turkey maybe?), but they’re coming. And semiconductors will continue to be needed in greater quantities than current production allows.
Seeking Alpha quant mentioned a large volume of hedge fund selling.
IPOs anyone?
“Seeking Alpha quant.” lol. Who’s that? Is that a service over there now? Or somebody’s name?
I’m with you H, I don’t see how this election changes chip, and especially HBM, profitability. Again, what AI needs almost as much as compute (read GPU/TPU) is loads of HBM. Consumer grade GPU’s for gamers have been getting shelved in 2026 due to the demand from AI firms. HBM producers are having to create even larger SoC’s than they ever have before to meet the memory demands from their customers.
Assuming D’s shut down ALL new DataCenter projects, the demand for these chips doesn’t follow suit. The likely outcome would be to retool existing DC’s with the new larger capacity HBM and newer GPU/TPU’s instead. That doesn’t mean less demand for chips, it just shifts where they will be deployed.
And speaking to HBM profitability -> “64GB DDR5 memory prices have surged dramatically—climbing from historical lows under $200–$250 in 2025 to over $900–$1,500+ in late 2026.”
“red-hatted stepchild” heh heh
That’s the best part of the whole article.
Beaten like a rented mule.
Let’s not forget, the Democrats don’t assume control until January 20th, 2027. In the tech world that’s a long time. I don’t suspect they’ll freeze data center construction everywhere, but they will slow it down and regulate it (and thank God, it’s about time someone did, no?) That sound you hear is not the market crashing (not yet anyway), it is merely the hiss of unbridled “hopium” leaking out of the AI balloon.
The real “AI reset” we are about to witness will be all of those Silicon Valley types crossing the aisle to cozy-up with Democrats. They certainly aren’t going away! (I can’t wait to see what Elon does, that should be sheer buffoonery of the highest order!) Speaking of “beaten down,” now might be a good time to research some beaten down U.S. based solar companies, as many of those AI data centers may start looking to “green up” their future projects right quick.
Corrections and Retractions:
The new Congress begin on January 3rd, 2027. My bad.