Congressional Power Over AI Jolts Global Markets

Global stocks and the U.S. dollar fell Wednesday after Democratic victories in the Nov. 3 midterm elections led investors to weigh whether a Democratic-led Congress could slow the expansion of artificial intelligence infrastructure or impose new rules on the industry. The market reaction put a question of public authority—who can shape data-center construction and AI regulation—alongside the financial interests tied to the build-out.

Futures tracking the Nasdaq 100 pointed to a 2.1% decline when U.S. markets opened Wednesday, and S&P 500 futures were down 1.2%. Futures for the Stoxx Europe 600 fell 1.3%. Japan’s Nikkei 225 dropped 4.5% to its lowest level since May, while South Korea’s Kospi fell 3.4%. The dollar declined 0.5% against a basket of trading partners’ currencies, reaching its lowest level in more than a month.

Who Controls the Build-Out

Democrats were expected to hold majorities in both chambers of Congress, while Republican Donald Trump remained president. The Financial Times described the result as a divided government, a setup that typically creates gridlock in Washington and can benefit financial markets. But investors focused on the scale of Democratic gains and victories in states with major AI hubs, including Texas, where political control could affect decisions about infrastructure.

In Texas and Ohio, governors oversee zoning and permitting and can impose moratoriums on data-center construction. Democratic victories in both states led traders to consider whether the construction build-out could slow. The immediate concern expressed in the report came from investors assessing the rules that elected officials might impose—not from workers or communities quoted about the data centers themselves.

“Normally a divided government is good for stocks as it means fewer policy changes, but this time, I wonder if the Democrats might push through AI regulation,” said Priya Misra, a portfolio manager at JPMorgan Asset Management. “Given how bipartisan the pushback against data centres is and how much the economy and stock markets are dependent on AI, I worry that this is bad news for stocks.”

That is the market’s hierarchy in plain view: a possible change in public rules becomes a risk to portfolios because stock prices and economic activity are described as dependent on AI. The report doesn’t quantify any cost to residents or workers, and it includes no account of community organizing, mutual aid, or direct action around data-center construction.

The Price of Investor Dependence

U.S. stocks had already faced pressure in the weeks before the election as investors questioned whether AI spending could continue at its existing pace. After reaching record highs in October, the Nasdaq 100 entered correction territory during election week, falling nearly 10%. The new political uncertainty landed on a market already uneasy about the sustainability of AI investment.

“You can see the impact on the Nasdaq and the drop in rates,” said Robert Tipp, PGIM’s head of global bonds. “The AI phenomenon is creating a lot of supply pressure, and so you’re seeing that knee-jerk reaction.” His explanation ties the selloff to supply pressure and investor exposure to the AI build-out.

In Asia, SoftBank, which holds a roughly 13% stake in OpenAI, fell 9.1%. SK Hynix fell 6.5% and Samsung Electronics fell 5.9%; the report identified SK Hynix and Samsung Electronics as the world’s biggest makers of AI memory chips. The election offers no solution outside the existing political and market structures in this account: it describes electoral victories, potential regulation, and investors repricing risk. “Asia is not very good at digesting US political risk or news flow,” said William Bratton, head of Asia-Pacific cash equity research at BNP Paribas. “There is no doubt that Democrats are doing better than even people who thought they were going to win expected.”