Global stocks and the dollar fell after Democratic victories in Tuesday’s US midterm elections prompted investors to consider whether the party could slow the expansion of AI infrastructure, a major driver of economic growth. The results are expected to leave Democrats in control of both houses of Congress while Donald Trump remains president, creating a divided government in Washington.
Although divided government is often seen as supportive of markets because it can limit policy changes, investors focused on the possibility of new AI rules and delays to data-centre projects. Democratic wins in Texas and Ohio, where state officials have influence over zoning and construction permits, added to concerns about a slowdown.
Futures indicated that the Nasdaq 100 could open 2.1% lower in New York, while S&P 500 futures fell 1.2%. Futures for the Stoxx Europe 600 were down 1.3%. In Asia, Japan’s Nikkei 225 dropped 4.5% to its lowest level since May, and South Korea’s Kospi fell 3.4%.
The dollar declined 0.5% against a basket of major trading partners’ currencies, reaching its lowest level in more than a month. Investors also pointed to the potential effect of the election outcome on US economic growth.
Shares of Asian companies linked to US technology demand also fell. SoftBank, which owns about 13% of OpenAI, lost 9.1%, while AI memory-chip makers SK Hynix and Samsung Electronics declined 6.5% and 5.9%, respectively.
The market reaction came as investors were already questioning whether AI spending can be sustained. After reaching record highs in October, the Nasdaq 100 had fallen nearly 10% by this week, entering correction territory. One investor described the election result as a source of concern because of the economy’s and stock market’s reliance on AI, while another said the industry’s infrastructure investment was adding to pressure on markets and interest rates.
Sources: Financial Times.