Trump-linked cryptocurrencies tumbled up to 16% and AI data centre stocks fell after Democrats’ strong US midterm performance. Investors fear tighter regulations and higher financing costs. Matthew Hougan said, “Any slowdown in the buildout could put significant stress on AI-linked neoclouds, as financing costs will mount even as revenues are pushed back.”
Synopsis
Trump-linked cryptocurrencies tumbled up to 16%, while shares of Bitcoin miners transitioning into AI data centre businesses slumped as Democrats' strong midterm performance rattled investor sentiment. Concerns over tighter regulations, potential construction delays in Texas and rising financing costs weighed on companies betting on the AI infrastructure boom.
The Democrats' strong performance in the US midterm elections has put pressure on investments closely associated with US President Donald Trump, including politically linked cryptocurrencies and companies transitioning from Bitcoin mining to artificial intelligence (AI) data centre operations.
According to data compiled by CoinGecko, the WLFI token issued by World Liberty Financial, which was co-founded by Trump, declined around 3% over 24 hours to trade at $0.04706 around 11 AM IST on Thursday. Trump's namesake memecoin, or Official Trump, fell nearly 16.1% during the same period.
Shares of Trump Media & Technology Group dropped 24.54%. The exchange-traded fund DJTU, which offers leveraged exposure to the company, lost almost 50%.
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The decline reflects concerns about the political standing of these businesses and the possibility of increased scrutiny or investigations, Noelle Acheson, author of the Crypto is Macro Now newsletter, said, as reported by Bloomberg.
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The election outcome has also raised questions about the future of data centre development, particularly in Texas. Several Bitcoin mining companies have been converting their existing facilities into AI computing centres, making their valuations increasingly dependent on demand for data centre capacity.
The possibility of tighter restrictions on data centre construction in Texas has raised concerns about project delays and higher financing costs. The state's political shift could affect the pipeline of new computing infrastructure at a time when companies are already dealing with significant funding requirements.
Among the companies affected, Galaxy Digital shares fell nearly 17%, while Hut 8 declined 23%. MARA Holdings lost around 4%, while Cipher Digital, Core Scientific and IREN recorded declines of at least 10%.
Investors are concerned that a slowdown in data centre construction could delay revenue generation while companies continue to bear financing costs. Matthew Hougan, chief investment officer at Bitwise Asset Management, highlighted this risk, according to Bloomberg.
Hougan said that, “Any slowdown in the buildout could put significant stress on AI-linked neoclouds, as financing costs will mount even as revenues are pushed back. It’s like when someone is building an apartment building and runs into construction delays; the financing costs continue while the revenues never appear.”
Texas is particularly important to the sector. Research firm SemiAnalysis estimates that the state accounts for nearly 30% of US data centre capacity expected to become operational in 2028, making it the largest contributor among US states.
The election of Gina Hinojosa as Texas governor has added to these concerns. Her campaign had advocated a temporary halt to unrestricted data centre development. Market participants believe the change in political leadership could lead to additional regulations, potentially favouring established operators with stronger compliance records.
Not all market participants believe the election results will necessarily hurt existing Bitcoin mining companies. Some argue that businesses with operational infrastructure already in place could benefit if stricter rules make it more difficult for new competitors to enter the data centre market.
According to CoinGecko, Trump-affiliated coins are the ones that are officially launched, endorsed, or held by Donald Trump or his immediate family. World Liberty Financial is largely controlled by the Trump family. Donald Trump is listed as the firm’s “Chief Crypto Advocate,” while his sons Eric and Donald Jr. are named “Web3 Ambassadors.” His youngest son, Barron Trump, is called the “DeFi Visionary.”
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