AI Data Center Stocks Crater as Capital and Politics Tighten

Cipher Digital (NASDAQ:CIFR) shares have fallen 55.05% over the past month, leading a brutal selloff across former Bitcoin miners that converted themselves into AI data center hosts. IREN (NASDAQ:IREN) dropped 44.07% in the same period, Hut 8 (NASDAQ:HUT) lost 41.04%, Galaxy Digital (NASDAQ:GLXY) gave up 36.17%, and Core Scientific (NASDAQ:CORZ) fell 26.22%. Third-quarter earnings reports show demand for AI computing remains strong, according to 24/7 Wall St., but money and political approval are getting harder to come by.

The selloff began around November 4, when Wall Street closed higher after Democrats won Congress — and data center stocks fell sharply. The next day, IREN delayed its goal of more than $4 billion in operating annual recurring revenue (ARR), moving the target from year-end to January, with management saying it could slip to the end of February.

The stakes are large. The AI infrastructure buildout is one of the biggest capital expenditure cycles in corporate history, and the divergence now visible in this cohort — between operators with secured power and funding, and those without — will determine who captures the rent on the computing shortage.

Is AI demand actually slowing?

No. The demand side of the market, as reported in third-quarter earnings, remains robust. AWS, the biggest cloud provider, set the tone: revenue rose 39%, its fastest growth in nearly five years, and its backlog reached $578 billion. Its parent company still expects about $220 billion of capital spending in 2026 and plans to spend, in its words, "meaningfully more in 2027". CEO Andy Jassy described the demand simply: "Almost as fast as we install capacity, customers are gobbling it up."

Galaxy puts U.S. data center vacancy at 0.9%. That scarcity has let the former miners convert into long-term contracts, and their reported backlogs reflect it:

• Core Scientific reports more than $24 billion of backlog
• IREN reports $20.3 billion
• Hut 8 values its AI portfolio at about $26.6 billion

The numbers describe a seller's market for capacity. The problem is not tenants. It is everything else.

Why has capital become the choke point?

IREN management told analysts that "capital markets have become more selective in the last few weeks." The company still needs to raise $6 billion for planned fiscal 2027 spending. Core Scientific CEO Adam Sullivan was more direct: "capital is the throttle on all new development." Sullivan said developers that are running out of money have started selling powered land and half-built projects — a sign of stress at the weaker end of the market.

Tenant credit is the second pressure point. Galaxy turned down lease terms on its Helios II expansion over the summer rather than accept protections it judged hollow. Galaxy's Christopher Ferraro explained the reasoning: "An investment-grade wrap that does not actually achieve investment-grade protection for both our debt and our equity is not really an investment-grade wrap." In other words, a contract is only as good as the counterparty standing behind it.

Construction costs are rising as well. At Barber Lake, Cipher paid $359 million of $409 million in change orders requested by its tenant — a cost structure that eats directly into project economics when financing is already expensive.

What is happening in Texas politics?

Politics now compounds the financing problem. Governor-elect Gina Hinojosa has pledged to stop new data center approvals until lawmakers protect electricity customers, water supplies and local communities. That freeze, if enacted, would come on top of restrictions already imposed by outgoing Governor Greg Abbott.

Texas is not alone. In New York, Governor Kathy Hochul imposed a one-year moratorium in July on new hyperscale permits for facilities of at least 50 MW (megawatts, the standard unit for data center power draw).

For an industry that needs grid connections, transmission approvals and local permits at scale, these moves convert regulatory risk into potential project-killing delay. Developers with only announced plans would hit the freeze first; operators already connected to the grid would keep collecting revenue.

Which companies already have power secured?

The dividing line is energized capacity. IREN's 1.4 gigawatt Sweetwater 1 site is already connected to the grid. Hut 8 locked in $3.25 billion and $4.25 billion of investment-grade project bonds that carry no claim on the parent company — a financing structure that insulates the broader business from project risk.

Others are further behind:

• Cipher's 1 gigawatt Colchis site has only a conditional grid classification
• Galaxy's Caspian project was downgraded to study load, and the company does not expect clarity until April 2027

The gap matters because grid interconnection queues are the gating asset in this market. A conditional classification or a study-load status leaves a project exposed to exactly the kind of political and regulatory shifts now gathering in Texas.

What happens on December 17, 2026?

Two dates will shape the near-term outlook. Hut 8 expects the results of Texas's data center audits on December 10, 2026. Final classifications in the Electric Reliability Council of Texas (ERCOT, the state's grid operator) Batch Zero process are due on December 17, 2026.

A clean outcome would clear the way for Hut 8 to finance Beacon Point Phase 2. The stakes for the broader sector are similar: ERCOT's classification decisions will determine which announced gigawatts become financeable, buildable capacity.

January brings its own tests. IREN's revised ARR deadline arrives — the target it pushed from year-end, with possible slippage to the end of February — and Core Scientific expects about $650 million from expiring warrants, a capital injection that would ease its own position at the throttle point Sullivan described.

If Hinojosa's freeze reaches projects already sitting in ERCOT's queue, the developers holding only announced plans will run into it first. The companies already connected to the grid will collect the rent.