PALO ALTO, California/SEOUL/TAIPEI/TOKYO -- The "blue wave" of Democrat gains this week in the U.S. midterm elections is likely to slow, not halt, AI data center development, analysts say, giving Asian tech companies, battered by investor concerns, cause for optimism.

By Thursday, voters had approved 44 local ballot measures restricting data centers in parts of California, Illinois, Maine, Ohio, New York and other states, according to RedBud Consulting.

In Texas, a major U.S. data center hub, Democrat Gina Hinojosa defeated Republican incumbent Greg Abbott for governor after proposing a temporary ban on their construction during her campaign.

The results, reflecting voter concerns about power demands, prices, jobs and the environment, would clearly "slow the pace of the planned 800 to 1,000 data centers across the U.S. fueling the AI Revolution," Dan Ives, tech analyst and partner at Yorkville Ives & Co. merchant bank, said in a note.

With hundreds of billions of dollars pouring into U.S. AI infrastructure from an Asian supply chain covering everything from chips to data center operations, Asia-Pacific companies and markets have sunk on the midterms outcome.

After the tech-heavy Nasdaq closed 6.4% lower in the U.S. on Thursday, the Nikkei Stock Average plunged by a similar amount in Tokyo on Friday morning. Shares in AI-focused SoftBank Group fell as much as 14%. It owns SB Energy in the U.S., developer of a huge AI data center project in Ohio and whose planned IPO has been delayed.

South Korean tech stocks fell sharply on Friday. Samsung Electronics, which produces advanced memory chips used in data centers, dropped 8.2%, while close rival SK Hynix plunged more than 10%. They had fallen by 7.6% and 9.5% respectively on Thursday.

Shares of several key players in Taiwan's AI chip and technology supply chain plunged by the daily limit of nearly 10% in Taipei, including Delta Electronics, MediaTek and Unimicron. Shares of giant contract suppliers Taiwan Semiconductor Manufacturing Co. and Foxconn also tumbled nearly 9% in morning trading.

"I don't think people should focus too much on stock market movements these days. The AI megatrend is not going to stop," said Mike Ma, executive president of Unimicron, top chip substrate and PCB supplier to Nvidia, Intel, Google and Amazon. "What really reflects the situation on the ground is that our customers are chasing us for supplies, while we are chasing our materials and equipment suppliers." Analysts said the pace of AI investment was expected to slow as a Democratic Party-led Congress strengthened its authority to investigate and oversee AI companies.

"Uncertainty regarding data center taxation and the burden of infrastructure costs ... will act as a downside risk to data center investment," Moon Nam-joong, global strategist at Daishin Securities in Seoul, said in a note.

In contrast, Chinese tech stocks led by the semiconductor sector surged after the midterm results were declared.

"How do you slow down the AI data center buildout while not at the same time giving China the opportunity to narrow the gap with the U.S. or ultimately take the lead over the coming years ... that remains the tug of war for the future House Speaker and the party," tech analyst Ives said in his note.

Other analysts and industry participants said the Democrats' sweeping gains did not mean the AI buildout came to a screeching halt, but they could change how data centers are built.

"The election is unlikely to reverse the structural demand for AI infrastructure, but it could change where facilities are built, how quickly projects proceed and who pays for the necessary infrastructure," Franklin Templeton chief market strategist Stephen Dover said in a note on Wednesday.

"Near term, we do see heightened uncertainty re the AI data center buildout," said Malik Ahmed Khan, senior equity analyst at Morningstar. "I believe that the medium-to-long term outlook on AI data centers in the U.S. will likely include builders providing more safety safeguards, local investments and contractual commitments to things such as investing in local communities as well as electricity bill protection."

On Thursday, OpenAI published a statement saying it would establish a "new standard for responsible AI infrastructure" which promised not to use non-disclosure agreements with public officials for more transparency on how their data center campuses were built and would impact local communities.

On the same day, Google announced a $17 billion data center in Wyoming, a Republican stronghold.

"We're committed to partnering with communities to build data centers the right way," Google said. "We will pay for 100% of the power we use, and when we build data centers, we'll cover the infrastructure needs directly driven by our growth." It remains to be seen whether Democrats can deliver on their campaign promises to put guardrails around artificial intelligence and data centers.

"The economic benefit of AI is well recognized across the party line. It makes sense for Democrats to talk about curtailing AI development and data centers on the campaign trail because it's quite obvious voters are getting fed up with the fear of AI job losses while prices like electricity keep going up," a government relations executive at a California-based cloud computing company told Nikkei Asia.

"But our read is that many Democratic leaders are well aware of the negative impact on the economy if we put too many brakes on AI and data centers at this point." As hurdles for data center projects are expected to increase in the U.S., interest in building AI infrastructure elsewhere, such as in Mexico, may also grow.

On Thursday, Meta President Dina Powell McCormick told the WSJ Tech conference in Napa Valley that "every hyperscaler is now thinking about 'Do we need to build outside the United States?' Because they're enormous investments, hedging those investments is a wise thing to do." Hyperscalers are large-scale cloud computing service providers that own and operate massive data center networks.

However, the government relations executive said Democratic Party leadership could impose stricter data security and privacy rules, especially for AI companies, to keep user data in the U.S., making data centers outside the country a less appealing option.

He added that the U.S.'s ongoing AI race with China and drastic policy changes on AI and data centers could inadvertently give Beijing an advantage.

"China is not far behind, and they are already leading us on data centers in terms of power supply and policy support," the executive said.

Meanwhile, a slowdown in future data center development could be good news for hyperscalers and those who already have facilities up and running.

Albert Zhang, founder and CEO of Compute Labs, an AI compute hardware financing company, said one scenario is that the midterms' outcome "limits the supply of compute to the public, which, at the end of the day, is going to increase the demand" for existing data centers.

All three major cloud-computing service providers -- Amazon, Microsoft and Google -- saw their share prices surge initially on the election results. The Big Tech players reiterated their commitment to AI investment in last week's earnings calls.

Analysts at the BMI research firm said regulatory friction surrounding AI infrastructure would intensify at the subnational level through to the end of 2028, "with roughly 53% of hyperscaler pipeline growth concentrated in newly flipped governor states such as Texas, Georgia, Ohio and Pennsylvania now exposed to heightened slowdown risk." Construction schedules for 2027 are largely locked in, they said, shifting the focus to 2028 and beyond, where risks include construction moratoria and higher costs as Democrats unwind tax exemptions and pivot toward "bring-your-own-power" mandates for data center builders.