Benzinga Pro data showed Hut 8 shares down 21.44% at $50.08 at publication time on Wednesday. Investors sold Hut 8 and other AI infrastructure stocks after Democratic midterm victories raised fears that regulatory barriers could delay data center construction and AI capacity expansion.
Democrats won control of both congressional chambers. CNBC noted that Democrats are viewed as supporting moratoriums on data center construction. The Texas gubernatorial result generated the greatest concern. Democrat Gina Hinojosa defeated Republican incumbent Greg Abbott after campaigning for stricter data center rules, including an immediate statewide moratorium. Wells Fargo said Texas accounts for 27% of the data center power capacity planned for development in the United States. Hut 8 has exposure through plans to purchase two powered West Texas sites offering up to 230 megawatts.
Yorkville Ives & Co's Dan Ives predicted in a Wednesday note that the election results will reduce the pace of data center construction nationwide. Ives identified Texas as a particular concern. Wells Fargo's Ohsung Kwon warned in a report this week that a Democratic victory in Texas might deliver an unusually severe setback for the sector. Concerns about data center spending had already driven the Nasdaq-100 into a correction in late October, before the election.
Hut 8 published third-quarter results before Wednesday's market opening. Earnings were 98 cents per share, compared with analysts' expected loss of 73 cents per share. Earnings a year earlier were 43 cents per share. Revenue reached $71.07 million, missing the approximately $75.93 million forecast by 6.40%. Revenue declined 14.90% from the year-earlier $83.51 million.
Hut 8 announced a second Beacon Point campus lease covering 352 megawatts with the existing tenant. The lease brings the expected value of contracted AI data center capacity to about $26.6 billion over the base terms. Hut 8 added 1,300 megawatts to the company's exclusive pipeline, increasing the pipeline to 3,180 megawatts. Hut 8 also closed a $1.07 billion revolving credit facility.
Hut 8 financed $250 million of share repurchases through bitcoin sales. Repurchases after the quarter ended accounted for $175.3 million, while repurchases before the quarter ended accounted for $74.7 million. Hut 8's board now authorizes total repurchases of up to $1.0 billion.
Hut 8 Shares Drop 21.44% Amid Fears of Data Center Regulation After Democratic Midterm Wins
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Summary
Hut 8 (NASDAQ:HUT) shares dropped 21.44% to $50.08 as Democratic control of Congress stirs worries about data center regulation delaying growth and impacting risk-on assets. Texas Governor-elect Gina Hinojosa, a Democrat, pledged to impose a statewide moratorium on data center construction. Hut 8 operates in Texas, where 27% of U.S. planned data center capacity is concentrated. Despite Q3 earnings above expectations, revenue fell short and declined year-over-year. The company announced a new lease and AI data center expansion, though CFT (Countering the Financing of Terrorism) compliance challenges could rise under tighter regulatory scrutiny.
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