Wall Street woke up on Wednesday to a political map it had not priced in — and spent the first hours of the morning changing its mind. US stock index futures first fell sharply as Democrats' sweeping midterm victories became clear, then reversed and rose after President Donald Trump accepted the election results and acknowledged that the war in Iran had played a role in Republicans' losses, according to Reuters reporting on Wednesday, November 4.
Source: Reuters via Kitco News
Democrats took control of both the Senate and the House, scoring wins in Republican strongholds for the first time in generations — including stunning Senate victories in South Carolina, Texas and Ohio — and ushering in a new era of divided government in Washington. For investors, the question was never only who won; it was what a Democratic Congress does to the two trades that have driven markets for two years: the artificial intelligence spending boom and the federal government's fiscal path.
The overnight fall: AI and data centres in the firing line
In the first reaction, investors sold stocks — especially AI-linked shares — put the dollar under pressure and bought bonds as a safe haven, while cryptocurrencies fell at the prospect of stronger regulation. S&P 500 futures slid 0.6 percent and Nasdaq futures fell more than 2 percent in the global session before cutting their losses, European futures dropped 1.4 percent, and in Asia the selling concentrated in chipmakers, with Samsung, SK Hynix and TSMC sliding sharply and SoftBank leading Japan's Nikkei 3 percent lower to a trough of more than five months. “Tighter regulatory scrutiny of technology and AI companies along with the higher likelihood of political gridlock beckon with a Democrat sweep,” said Prashant Newnaha, senior rates strategist at TD Securities in Singapore.
Source: Reuters
The specific fear is the data-centre buildout. Democrats made gains in key data-centre states, where public opposition to the industry's rapid expansion has been growing, and analysts warned that political control could now slow the construction wave that has powered the AI trade. Kim Seok-hwan, an analyst at Mirae Asset Securities, said the Democrats' victory in Texas is likely to weigh on chip stocks by raising fears of tighter curbs on AI data-centre development in one of the fastest-growing US markets for computing infrastructure: “If Texas declares a moratorium on data centres, as New York did, projects could face further delays.” Charu Chanana, chief investment strategist at Saxo, said the sharper decline in Nasdaq futures reflects concerns that a shift in political control could bring greater regulatory scrutiny of AI and Big Tech at a time when investors are already questioning elevated valuations and rising AI spending — the tech-heavy Nasdaq-100 had already confirmed a technical correction on Monday.
The reversal: Trump accepts the result, futures climb back
The mood turned when Trump accepted the results. US futures had fallen as much as 2.4 percent on the Nasdaq-100 and 1.4 percent on the S&P 500; after the president's acceptance — and his acknowledgement that the Iran war played a role in the Republican losses — they clawed back the losses. At 4:22 a.m. ET, Dow E-minis were up 436 points, or 0.84 percent, S&P 500 E-minis were up 26.75 points, or 0.35 percent, and Nasdaq-100 E-minis were up 44.75 points, or 0.16 percent. “This has helped ease some concerns about prolonged political confrontation and legislative gridlock, although his continued veto powers mean significant policy disagreements remain likely,” said Daniela Hathorn, senior market analyst at Capital.com.
In premarket trading the split inside the AI trade was visible. Data-centre-related companies dropped — IREN, Hut 8 and Applied Digital all traded lower, and the neocloud firms Nebius and CoreWeave also fell — while the biggest hyperscalers were mixed: Amazon, Microsoft and Meta Platforms traded higher and Alphabet lagged with a 0.3 percent decline. Elon Musk's SpaceX and Tesla fell around 4 percent each. Chipmaker AMD jumped 6.2 percent after forecasting faster-than-expected 2027 growth on surging data-centre sales, with Nvidia up 0.5 percent, Micron Technology up 0.1 percent and Broadcom up 0.2 percent. Solar companies were among the early gainers — First Solar up 8.1 percent, Canadian Solar up 7 percent and SolarEdge Technologies up 3 percent — a move investors linked to the new Congress's energy politics. Uber, McDonald's and CVS Health were among the prominent companies reporting earnings before the opening bell.
Bonds won the night, the dollar lost it
The clearest verdict came from the bond and currency markets. The yield on the benchmark US 10-year Treasury note fell 6 basis points to 4.906 percent as Treasuries rallied — investors betting that gridlock in Washington will cut government spending, put further tax cuts on ice and slow the growth that would force rate hikes. “Bonds are coming out as the clear winner as markets put the AI trade on the chopping block and embrace the higher possibility that further tax cuts are put on ice and government spending slows,” Newnaha said. The dollar slid broadly: the euro rose 0.5 percent to $1.1249, sterling firmed 0.37 percent to $1.3464, the dollar index fell 0.37 percent to 101.34, the Japanese yen strengthened 0.7 percent to 157.55 per dollar and the Swiss franc firmed almost 0.8 percent to 0.8144 per dollar. Oil prices were choppy after sliding to a four-week low in the previous session, as investors weighed talks to end the wars in Ukraine and Iran against the risk that fresh attacks could disrupt supplies.
A Democratic Congress changes the odds on the issues this readership follows closest: immigration enforcement funding and oversight, tariff and trade policy, and the data-centre and warehousing buildout that employs thousands across California's Central Valley, Texas and the Midwest. Gridlock also freezes the tax and spending plans markets had priced in — which is why bonds rose even as technology shares wobbled.
What happens next
Wednesday's regular session, which opens at 9:30 a.m. ET, is the first full test of whether the premarket recovery holds, with the AI trade in focus and big earnings — Uber, McDonald's and CVS Health — landing before the bell. Aidan Yao, senior investment strategist for Asia at the Amundi Investment Institute, warned that restrictions on the AI boom could inject significant uncertainty into the outlook for the US economy, inflation and monetary policy. Investors are also watching the country's deteriorating fiscal picture: yields on long-dated Treasuries moved lower on the day, but traders say political gridlock may make it harder, not easier, to agree on new spending. All figures in this report are as reported by Reuters during the overnight and premarket session on November 4 and will move as trading develops.