Democrats swept the U.S. midterm elections, reshaping the global technology and industrial landscape.
Democrats won gubernatorial races in key states including Texas and Georgia, with some candidates explicitly pledging to impose moratoriums on data center construction. The outcome has cast doubt on the prospects for AI infrastructure expansion 鈥?Asian chip stocks broadly declined on Wednesday, U.S. Treasury yields fell in tandem, and the Nasdaq has retraced roughly 8% over the past month.
For South Korean companies, the election results present a mixed picture. Chipmakers such as Samsung Electronics and SK Hynix worry that tighter data center regulation will suppress demand for server DRAM and high-bandwidth memory. Meanwhile, solar companies such as Hwahwa Solutions anticipate benefits from Democratic efforts to restore clean energy tax credits under the Inflation Reduction Act.
Anti-Data Center Sentiment Spreads, Tech Stocks Under Pressure
The scale of victories by data center opponents in this midterm cycle caught the market off guard. In Texas, GLJ Research estimates the state accounts for roughly one-quarter of U.S. data center capacity expected to come online by 2030. Democrat Gina Hinojosa defeated incumbent Republican Governor Greg Abbott, ending three decades of Republican dominance in the state; fellow Democrat James Talarico also won a Senate seat. In Georgia, where Atlanta is the most active market for data center construction in the country according to commercial real estate firm CBRE, Democrat Keisha Lance Bottoms won the governor's race, ending more than two decades of Republican rule.
Notably, opposition to data centers is not purely partisan. Critics cite noise pollution, heavy water consumption, enormous electricity usage, and the fact that data centers drive up residential power bills while creating jobs and tax revenue disproportionate to the incentives state governments provide. Even some Republicans have turned against such projects. Elon Musk, who donated more than $450 million to Republicans this cycle, quipped on social media on election night that "building data centers in space sounds pretty attractive."
Aidan Yao, senior investment strategist at the investment research arm of Amundi, Europe's largest asset manager, said:
"In our view, this midterm election is more like a referendum on AI than a referendum on Trump. If the AI theme faces certain constraints, then the U.S. economy, U.S. inflation, and U.S. monetary policy all become extremely uncertain."
South Korean Chip Industry: CHIPS Act Subsidies Likely Preserved, Data Center Rules a New Concern
For Samsung Electronics and SK Hynix, Democratic control of Congress sends mixed signals. On the positive side, Democrats are positioned to check the Trump administration's attempts to cut CHIPS Act subsidies. The Trump administration has sought to renegotiate subsidy terms finalized under the Biden administration, drawing criticism from some Democratic lawmakers. Samsung Electronics' subsidy tied to its Taylor, Texas fab investment amounts to as much as $4.745 billion.
However, concerns over tightening data center regulation are mounting. Industry sources say the market's focus is on the possibility that approvals for data center construction could be tightened on grounds of AI safety, power, and environmental issues, delaying new project starts and ultimately weighing on demand for server DRAM and high-bandwidth memory.
KB Securities analyst Kwon Hee-jin believes tighter regulation does not necessarily translate into shrinking investment. "Data centers have a major impact on local tax revenue and regional economies, so it would be difficult for state governments to outright ban construction," he said. "A more likely adjustment would be to pass electricity costs on to data center operators, or require them to secure their own power supply before breaking ground." If so, tech giants would have to build their own substations, transmission networks, and power generation facilities, potentially increasing overall infrastructure spending and creating new demand for South Korean power equipment manufacturers.
Auto Industry: Tariff Barriers Expected to Persist
The auto industry holds little hope for policy relief. The 15% tariff imposed under Section 232 of the Trade Expansion Act falls within executive authority and is expected to remain in place regardless of which party controls Congress. Cho Sung-dae, head of trade research at the Korea International Trade Association, said: "Congressional oversight of the administration's policy implementation may intensify somewhat, but the likelihood of a major shift in tariff measures is very low." He believes that with Washington continuing to focus on protecting domestic industries and strengthening supply chains, pressure on auto tariffs and expanded U.S. production will persist.
Still, Democratic control of Congress could inject new momentum into EV promotion policies, pushing Hyundai Motor and Kia to further deepen their electrification efforts.
Shipbuilding: Cooperation Framework Likely to Continue, but Room Limited
The key variable for the shipbuilding industry is the extent to which the U.S. will allow its naval vessels to be built overseas. The National Defense Authorization Act passed by the House explicitly prohibits funding for combat vessels built at foreign shipyards, while the Senate Armed Services Committee version allows some non-combat vessels to be built abroad.
Shinhan Securities noted that if the U.S. further hardens its stance on restricting foreign construction of naval vessels, expectations for new shipbuilding orders through MASGA 鈥?the "Make American Shipbuilding Great Again" Korea-U.S. shipbuilding cooperation program 鈥?would narrow, with cooperation opportunities concentrated in maintenance, repair, module supply, and local shipyards. However, since rebuilding the U.S. shipbuilding industry is a bipartisan consensus and MASGA investment is led by the executive branch, the industry broadly expects the overall cooperation framework to remain unchanged.
Renewable Energy: Policy Tailwinds Benefit South Korean Companies
The renewable energy sector is the most optimistic about the election results. Democrats campaigned on restoring clean energy tax credits under the Inflation Reduction Act, and companies such as Hwahwa Solutions, which have large production bases in the U.S., are widely seen as beneficiaries. The solar sector is particularly worth watching 鈥?South Korean companies thereby hold an advantageous market position.
U.S. Business Expansion: South Korean Firms Closely Watch Congressional Political Dynamics
The reason South Korean companies are so sensitive to shifts in the congressional power balance is that their U.S. business share has risen sharply. A survey by corporate data provider CEO Score of overseas subsidiaries of 28 major conglomerates showed that as of the end of June this year, the number of U.S. subsidiaries reached 1,308, up 232.0% from 394 a decade ago, with their share of all overseas subsidiaries jumping from 13.0% to 26.5%.
The number of U.S. subsidiaries under Samsung, SK, Hyundai Motor, LG, and Hwahwa rose from 240 to 888 over the same period. Among them, Hwahwa posted the most striking increase, from 63 to 374, driven by aggressive expansion in solar and energy storage businesses; SK followed, rising from 40 to 243; and Hyundai Motor grew from 55 to 112.
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