Markets react to Democratic midterm victories and AI chip selloff

Global markets have seen a cooling period following a significant rally driven by Democratic victories in the U.S. midterm elections. While the Dow Jones Industrial Average saw a major boost previously, investors are now assessing the impact of a Democratic-controlled Congress on the market landscape.

Tech and AI Sector Volatility

AI-related stocks have experienced a selloff following the election results. In South Korea, Samsung Electronics stock dropped 7.5% and SK Hynix stock fell 9.5% on Thursday, according to The Wall Street Journal. In the U.S., Nvidia $NVDA stock fell 3% on Wednesday, and CoreWeave stock fell approximately 10%.

Strategists are looking toward state-level political shifts as a driver for sector volatility. According to The Wall Street Journal, strategists expect Democratic victories in Congress and state governor contests, particularly in Texas, to slow the pace of new data center construction. UBS strategists stated in a research note that a data center slowdown "should impact estimates for AI infrastructure stocks as well as cloud companies."

In Texas, Democrat Gina Hinojosa defeated Republican Gov. Greg Abbott, according to The Wall Street Journal. Hinojosa has called for ending data center development in the state. Wells Fargo $WFC estimates that Texas holds 27% of planned U.S. data center gigawatts.

Market Performance and Other Sectors

Market futures showed mixed results on Thursday. Nasdaq $NDAQ futures fell 0.7%, S&P 500 futures were flat, and Dow Jones Industrial Average futures rose 0.4%. In Asia, Japan's Nikkei 225 and South Korea's Kospi both declined sharply.

Other notable market movements include:

• Qualcomm: Shares fell over 9% in premarket trading after fourth-quarter smartphone chip sales missed estimates. Seaport analyst Jay Goldberg said Qualcomm’s data center business is "barely offsetting the losses from its smartphones."
• Musk Companies: Tesla and SpaceX were down in premarket trading after falling over 3% during the previous session. CNBC reports the pressure follows Musk's failed $474 million election gamble.
• Cryptocurrency: Bitcoin is hovering around the $80,000 mark as investors assess how a Democratic Congress might impact Washington's view of the industry.

Why it matters

The shift in political control introduces new variables for infrastructure and technology sectors. The potential for slower data center development in key states like Texas, combined with a new congressional dynamic, is driving volatility in AI-related stocks and broader tech markets.

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Sources

• qz.com: AI chip stocks extend global selloff after Democratic midterm sweep
• cnbc.com: Markets cool after the monster midterm rally, Musk's stocks under pressure

This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.