Wall Street surges on Democrat midterm win; AI stocks split, data centre firms tumble
Wall Street closed sharply higher on Wednesday after Democrats swept the US midterm elections. While broad markets rose on reduced uncertainty, data centre and chip stocks tumbled on fears that tighter AI regulation will slow infrastructure buildout and strain their finances.
Wall Street closed sharply higher on Wednesday as Democrats' sweeping midterm election victory eased political uncertainty and boosted risk appetite, according to preliminary data. The S&P 500 gained 119.81 points, or 1.58 per cent, to end at 7,688.73, while the Nasdaq Composite gained 366.26 points, or 1.44 per cent, to 25,736.51. The Dow Jones Industrial Average rose 1,575.38 points, or 3.04 per cent, to 53,362.57.
Democrats seized control of both the Senate and House of Representatives, scoring wins in Republican strongholds for the first time in generations in a voter backlash against President Donald Trump. A sharp decline in oil prices, driven by bets that a shift in power will hasten the end of the Iran war, boosted positive sentiment for the broad stock market.
"Stocks are sharply higher today as election clarity reduces uncertainty," said Terry Sandven, chief equity strategist at US Bank Wealth Management in Minneapolis. "The election introduces a degree of gridlock to the economic backdrop and that oftentimes is favorable for equity prices, and we are seeing some of that today."
AI stocks were split. Shares of cash-rich AI heavyweights rose, while chipmakers and data center operators fell after Democrats made gains in key data center states including Texas and Georgia, where public opposition to the industry's rapid expansion has been growing. AI heavyweights Amazon.com, Meta Platforms and Alphabet rose, while shares of data center operators IREN and Hut 8 dropped sharply and Applied Digital and Core Scientific also tumbled. AMD dropped even after forecasting faster-than-expected 2027 growth as its data center sales surged.
"It's pretty clear that the AI trade will face some headwinds there ... If you push out the pace or change the pace of the data center buildout, you begin to change the fundamental trajectory for many of those suppliers," said Scott Chronert, head of US equity strategy at Citi Research.
The Philadelphia SE Semiconductor index hit a six-month low. The AI trade has come under pressure recently as investors grow more concerned over Big Tech's soaring AI spending. The tech-heavy Nasdaq-100 confirmed on Monday it was in a technical correction. All but two of the S&P 500 sector indexes rose, with consumer discretionary jumping and energy falling. The dollar weakened against most currencies and yields on long-dated Treasuries moved lower.