CIBC outlines stocks positioned for tougher U.S. regulation after Democratic sweep

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CIBC on stocks after regulation

Highlights

CIBC's Democratic basket favors major tech and defensive stocks like Meta, Apple, Alphabet, Amazon, and Microsoft, expecting stricter U.S. regulation.
The defeat of Texas Governor Abbott and Gina Hinojosa's moratorium stance could slow AI data-center construction, pressuring related industrial stocks short term.
Recent $25 billion Microsoft and $15 billion Meta debt sales support tech valuation multiples, while CIBC expects most data-center projects eventually to proceed nationwide.

CIBC’s investment baskets and sector preferences

As reported by CNBC, CIBC set out two election-based stock baskets in a report released Wednesday, one for a Democratic-controlled Congress and another for a Republican-controlled Congress. The bank says its Democratic basket is built for a less business-friendly and more regulation-driven environment, with a tilt toward major technology platforms, multinational businesses and stocks with lower volatility.

Christopher Harvey, CIBC head of equity and portfolio strategy, says AI “picks-and-shovels” names are de-emphasized in that scenario in favor of hyperscalers and software companies. The bank’s list of 36 stocks expected to benefit under Democratic control includes Meta Platforms, Apple, Alphabet, Amazon and Microsoft, alongside names such as Palo Alto Networks, Accenture, Visa, Cigna Group, Republic Services and NextEra Energy.

The basket also spans consumer staples, real estate, health care, financials and utilities, reflecting a broader defensive positioning. By contrast, CIBC’s Republican basket favors AI exposure on expectations of lighter regulation and less resistance to data-center construction under a GOP Senate, with 45 names including Nvidia, Advanced Micro Devices, Broadcom, Vertiv and GE Vernova.

Texas data-center risks and market implications

CIBC says Texas is a key concern for the AI trade after the defeat of Republican Governor Greg Abbott, warning that Governor-elect Gina Hinojosa’s support for a moratorium on new construction and permits could complicate data-center development. The bank says that could trigger a near-term underperformance in AI industrial stocks tied to the buildout cycle.

At the same time, CIBC argues that a slower construction pace could help hyperscalers by stretching capital spending over a longer period and supporting valuation multiples at the margin. It also points to recent debt sales of $25 billion by Microsoft and $15 billion by Meta as helping ease pressure on the group.

Even so, the bank expects most or all scheduled data centers ultimately to be built because of the jobs, economic growth and tax revenue they generate. CIBC adds that some projects could shift to states with regulated utilities that backed President Trump in the 2024 election, but it still sees the broader buildout moving ahead over time.

Our earlier article on U.S. AI data-center expansion highlighted mounting obstacles to the buildout, including rising financing costs, construction delays and power constraints that are slowing projects. We also noted that only a fraction of planned developments were viewed as credible, with setbacks in Texas underscoring how cost overruns and tighter funding conditions can pressure both developers and AI infrastructure-linked stocks.

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