Markets Recalibrate as Democratic Sweep Reshapes AI, Fiscal Outlook

Wall Street futures staged a dramatic reversal overnight Wednesday as the scale of the Democratic midterm victory became clear, with dip buyers turning an initial "blue tsunami" puke into a broad rally. S&P 500 futures rose 0.9% to 7,665 by 8:15 a.m. ET, while Nasdaq futures — which had fallen as much as 2.4% — were down just 0.2%. Dow futures jumped roughly 1.7%, or about 870 points, and the Russell 2000 futures surged 1.3%, according to ZeroHedge. The VIX tumbled 12.8% to 18.16.

Democrats swept both chambers of Congress, flipping Senate seats in Texas, Ohio, Kansas, South Carolina, North Carolina, Iowa and Maine, and winning the governorships of Texas, Ohio and Georgia, ZeroHedge reported. They are on track for at least 54 Senate seats. The flip of the Texas governorship — where Gina Hinojosa is set to become governor after a race Bank of America strategists described as a "referendum on affordability versus AI data centers" — was a key trigger for the initial selloff, as markets feared tighter regulation of AI and data center expansion.

The dollar slid 0.5% to its lowest since Sept. 30, on track for its worst day since early September, according to ZeroHedge. Gold blasted back above $4,000, jumping 3%, while silver surged nearly 5%. Treasuries were bid, with yields 3-5 basis points lower and the 10-year at about 4.915%, as a divided government curbs the fiscal outlook. The Bloomberg dollar index fell, with the euro up 0.6% and the kiwi leading G10 gains.

**Tech Sector Split**

The Mag 7 stocks were mostly higher in premarket trading: Amazon +3%, Meta +0.8%, Microsoft +1.9%, Alphabet +0.9%, Apple +1.5%, while Nvidia was flat. Tesla fell 5% and SpaceX dropped 6% as election results sharpened investor concern over the future of the Republican megadonor's key holdings, ZeroHedge reported. Some data center and cloud computing stocks slipped — CoreWeave, Equinix, GE Vernova and Oracle were among decliners — while other AI-linked names were broadly higher.

Advanced Micro Devices gained 1% after giving a sales forecast that soared past analysts' projections, a sign of buoyant demand for data center processors, per ZeroHedge. Super Micro climbed 2% after forecasting second-quarter net sales above the average analyst estimate. Solar names soared, while defense stocks slid.

**Global Spillover**

The risk-off mood slammed Asian markets on Friday. Japan's Nikkei slumped 6%, its deepest one-day drop since April 2025, Al Jazeera reported. South Korea's Kospi plunged more than 8% at one point, triggering a trading halt, before cutting losses. The Taiwan stock market closed down 4.5%, clocking a 12.2% weekly decline — its biggest since 1991, according to LSEG data cited by Al Jazeera. Korean AI chipmakers Samsung Electronics and SK Hynix fell nearly 6% and 9.4% respectively. In Japan, Kioxia plunged 11% and SoftBank Group slid 11%.

China and Hong Kong stocks also tumbled. The Shanghai Composite fell 1.1%, while the tech-focused Star 50 Index and the AI Index slumped as much as 5% before recouping some losses, Free Malaysia Today reported. In Hong Kong, the Hang Seng Index was down 1% and the Hang Seng Artificial Intelligence Index tumbled 4%. Chinese AI hardware stocks with U.S. exposure were hit hardest: Zhongji Innolight slumped 8% to a one-year low, and Eoptolink Technology tanked 7%.

European markets fell sharply, with the FTSE 100 down 1% after being on track for its worst day since March, The Guardian reported. Germany's Dax fell 2%, France's Cac 40 lost 0.8%, and Spain's Ibex ended down 0.6%.

**Regulatory Calculus**

Analysts noted that while Democrats favor more regulation of AI and data centers, actually passing federal legislation will be tough given President Trump has vowed to veto any bills and Democrats lack a veto-proof Senate majority, according to WKZO. However, the large number of Democratic governorships gives the party more power at the local level to put hurdles in the way of data center builds, including rules on water and power requirements.

JPMorgan flagged "investigation risk" for business leaders tied to Trump donations, including MegaCap Tech, WKZO reported. For bond markets, the early assumption was that the election result might limit further deficit spending, including on defense. That helped lift Fed fund futures, which took about 6 basis points of hikes out from next year. Two-year yields were down almost 8 basis points at a two-month trough.

**Analyst Views**

Toby Walsh, chief scientist for the AI Institute at Australia's University of New South Wales, told Al Jazeera he expected new regulations on data centres in many countries, including the U.S., Australia and the U.K. "The developers were building them in a way that wasn't actually getting social licence," he said, adding that building in remote areas was an alternative.

Dong Baozhen, chairman of asset manager Lingtong Shengtai, said the selloff showed that "AI stock prices had been built on rosy illusions about the future, and now that illusion is gone," as reported by Al Jazeera and Free Malaysia Today. "The US stock market has been the standard-bearer and backbone of the global AI bull run. Now that backbone has snapped."

Lee Robinson, CIO of Altana Downside Protector Fund, told The Guardian the selloff was "a long-time coming" and not just caused by the midterms, but by stretched valuations and rising Credit Default Swaps of the Magnificent Seven and CoreWeave. "Credit is the engine of capital markets which equities will always eventually follow," he said.

**Other Movers**

In premarket corporate news, Oracle canceled a $7 billion chip leasing deal with Tencent under pressure from the Trump administration, the Financial Times reported, as cited by ZeroHedge. CVS Health said it plans to spin off its retail pharmacy business and raised its FY adjusted EPS outlook to at least $8.20. McDonald's reported Q3 comparable sales up 1.5%, while Uber sees Q4 gross bookings of $63.25 billion to $65.25 billion. HP Inc. named Emma Walmsley as CEO.

Economic data due Wednesday includes October ADP employment change, September trade balance, final S&P Global services PMIs, and ISM services. The Treasury publishes its quarterly refunding announcement at 8:30 a.m. ET and sells $75 billion of 17-week bills. No Fed speakers are scheduled.