Microsoft and Amazon combined to see a $424 billion market-cap boost - and these factors show why

By Hannah Pedone and Britney Nguyen

Microsoft and Amazon shares rise sharply on Wednesday, with one portfolio manager noting that a cloud-supply crunch could help the companies raise prices

Microsoft's stock closed up 6.7% on Wednesday.

A few factors help explain why Amazon.com and Microsoft shares are seeing such strong gains in the wake of the midterm elections, experts say.

For one, while investors in some pockets of the technology sector are sweating the possibility of new data-center restrictions now that Democrats have won control of Congress and key gubernatorial seats, investors in Microsoft and Amazon might be reasoning that a slower approach to data-center development might not be such a bad thing.

Texas Gov.-elect Gina Hinojosa campaigned on issuing an immediate moratorium on data-center construction until the state government can issue rules around the buildout. Incumbent Republican Gov. Greg Abbott issued a temporary pause on data-center permits in September, although a report from watchdog group FracTracker with Public Citizen found that permitting continued after the order.

As demand for computing power is expected to continue outstripping supply, "any incremental constraint on future data-center capacity" could allow incumbent cloud-service providers such as Amazon and Microsoft to raise prices, John Belton, a portfolio manager at Gabelli Funds, told MarketWatch. That could lead to better margins for the companies, he added, which would mean higher profitability.

There is also an argument to be made that Microsoft and Amazon could slow data-center spending in this new environment - something investors may be welcoming given that investments in AI have been eating away at the cash being generated by these companies.

Amazon's stock (AMZN) closed up 6.1% on Wednesday, while Microsoft's stock (MSFT) gained 6.7%. Together the companies added $424 billion in market capitalization on the day, with Amazon adding $166 billion and Microsoft gaining $259 billion in market cap, according to Dow Jones Market Data.

Fellow cloud provider Alphabet (GOOGL) (GOOG) closed up 3.2% on Wednesday. Meta Platforms' stock (META) closed up in the green as well, up 1.4%.

Tigress Financial Partners analyst Ivan Feinseth told MarketWatch that Microsoft and Amazon were benefiting from "a combination of post-election relief, declining policy uncertainty, renewed investor enthusiasm for AI and cloud computing and significant short covering."

He said that while investors were positioning for a post-election selloff, they're now "unwinding" from defensive positions.

Feinseth sees the election as a near-term catalyst for tech stocks like Amazon and Microsoft. The "more sustainable drivers," such as continued AI demand and spending on infrastructure, will drive those stocks in the long run, he added.

-Hannah Pedone -Britney Nguyen

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11-04-26 1633ET