The US stock market showed broad growth on Wednesday as investors speculated that a divided Washington following the Democrats' victory in the midterms might limit sharp policy shifts. However, shares of data center companies faced pressure due to concerns over potential tightening of artificial intelligence regulations.
Democrats gained control of the Senate and the House of Representatives, achieving unexpected victories in Republican strongholds for the first time in many years, which was seen as a voter reaction against President Donald Trump.
The prospect of fewer large-scale legislative changes boosted the value of some major technology stocks, while companies involved in AI infrastructure development lost ground. Scott Chornert, Head of US Equity Strategy at Citi Research, noted: 'The general sentiment is that this is a cleansing event, so the election uncertainty is now behind us.'
Among hyperscalers, Amazon.com rose by 7.1%, Meta Platforms increased by 1.6%, and Alphabet showed a rise of 3.4%. As of 9:46 AM Eastern Time, the Dow Jones Industrial Average rose by 1203.07 points, or 2.30%, reaching 52,989.79. The S&P 500 added 129.88 points, or 1.72%, totaling 7,698.80, and the Nasdaq Composite increased by 540.38 points, or 2.13%, reaching 25,912.39.
The dollar weakened against most currencies, and long-term Treasury yields declined. Trump acknowledged that the US-Israel war against Iran played a role in his party's electoral defeat.
Companies led by Elon Musk, such as SpaceX and Tesla, were among the laggards, declining by 1.9% and 3.9% respectively. Musk spent nearly half a billion dollars supporting Republican candidates, including efforts to retain Republican control in Texas, where both companies are based.
Eight out of 11 S&P 500 sectors traded higher, led by consumer discretionary goods. After fast-food chain McDonald's beat quarterly profit forecasts, its shares rose by 3.9%, and payments company Block jumped 15% after raising its annual gross profit forecast.
Focus on AI Trading
AI trading will be under close scrutiny after Democrats gained votes in key data center states, including Texas and Georgia, where public discontent over the rapid expansion of the industry is growing. Chornert added: 'It is quite clear that AI trading will face some hurdles there... If you accelerate or change the pace of data center construction, you start changing the fundamental trajectory for many of these providers.'
Recent pressure on the AI sector stems from investor caution regarding Big Tech's rising AI spending with little evidence of adequate returns. The tech-focused Nasdaq-100 confirmed a technical correction on Monday. Shares of data center operators IREN, Hut 8, Applied Digital, and Core Scientific fell between 1.2% and 13%.
Chip manufacturers' stocks remained largely unchanged despite AMD's forecast of faster-than-expected growth in 2027 amid increased data center sales; the chip maker's stock was last up 4.8% during volatile trading. Defense contractors Northrop Grumman, RTX, and Lockheed Martin shares dropped sharply as Trump's request for a $1.5 trillion budget may now face a more difficult path in Congress.
Companies related to solar and clean energy rose, as the Democratic victory could strengthen expectations of continued federal support for clean energy development. The Invesco Solar ETF index rose by 8.3%. On the NYSE, the number of advancing issuers exceeded the number of declining ones at a ratio of 3.6 to 1, and on Nasdaq—at a ratio of 3.49 to 1. The S&P 500 recorded 42 new 52-week highs and three new lows, while the Nasdaq Composite registered 105 new highs and 54 new lows.
