AI stocks came under pressure after Democrats’ victories

Trump blamed the election results for a punishing day in the stock market, but the reported pressure was concentrated in AI and data-center exposure. “The Stock Market suffered one of the Worst Days in History based on the results of the Election,” Trump wrote on Truth Social, the New York Post reported.

The charge costs him a simpler political line. President Donald Trump blamed Democrats' sweeping midterm election victories for the selloff and warned that Americans' retirement savings had taken a hit, according to foxbusiness.com. Yet CNN reported that most stocks had been higher on Wednesday while shares of semiconductor chipmakers and other companies involved in the data center buildout fell.

The broad market had rallied first. CNN reported that US stocks soared as Wall Street digested the Democrat sweep and weighed divided government, the war with Iran, Trump’s policy agenda and the AI trade. The Dow posted its biggest post-midterm elections single-day gain since 1982, according to data from CFRA Research, CNN reported. Morningstar said the Morningstar US Market Index closed 1.5% higher as votes rolled in.

That opening move makes the next move harder to read as a single verdict on Democratic control. If the election alone were the market’s enemy, the first broad rally would be the odd fact. A narrower reading is that investors welcomed falling uncertainty even as they weighed political risks for AI and data centers.

The weakness showed up in stocks exposed to questions about AI regulation and data-center development. Morningstar reported that AI-linked tech stocks came under pressure as investors weighed reduced investment and greater regulatory scrutiny, particularly around data centers. The selloff was driven in part by steep losses in technology and artificial intelligence stocks as investors weighed the potential impact of Democratic victories on AI regulation and data-center development.

Chris Larkin, a managing director of trading and investing for E*TRADE from Morgan Stanley (MS), put the split in plain language for CBS News. He said that even though the market rallied after the midterm elections, “there were visible cracks in the AI ecosystem,” and that they widened as investors worried about a slower data center buildout with Democrats in charge of Congress.

Joe Maher, markets economist with Capital Economics, gave CBS News a tighter version of the same fear. “The trigger for these moves appears to be the concern that the Democrats, both in Congress and at the state level, will seek to regulate the AI industry and restrict data center development,” he said in a report.

The record gives that fear a specific channel. Morningstar reported that legislation could end tax breaks, tighten environmental, water and electricity rules, and make it easier for localities to impose moratoria. The same report said states in which Democrats look likely to introduce restrictions account for 45% of planned US data center capacity.

Morningstar also reported that the composition of state governments, including Texas, may prove more consequential for individual data-center projects than the change in congressional control. A national election can change the story, but state governments may prove more consequential for individual projects.

Incoming Democrats have pledged to rein in AI and data centers. That does not prove a new rule will pass, but it helps explain concern about companies whose growth depends on data-center development.

The statement against interest came from investors who were not naturally arguing for calm. Justin Buell, chief investment officer at Continuity Group, wrote that a blue wave could spark volatility in tech and AI because of public opposition to data centers, CNN reported. He still argued that markets could grind higher as investors applauded falling uncertainty.

Stephen Brown, chief North America economist with Capital Economics, made the restraint case from the other side. The Democrats’ gains did not change much for the near-term policy outlook, he said in a note cited by DW, because the party still lacks a filibuster-proof majority in the Senate and President Trump has veto power to block legislation.

Taken together, Buell and Brown describe why the first rally was not irrational. The vote can reduce uncertainty without immediately rewriting federal law. The risk for AI shares lies in a different place: slower permits, tougher local rules and a political promise to rein in data centers.

Most Indices Are Still Up

The selloff still spread beyond the United States. The Guardian reported that European and Asian stock markets fell sharply after the Democrats’ decisive midterm victory triggered a rout in US tech stocks a day earlier. It also reported that a Wall Street selloff was followed by sharp falls in Asian stock markets.

Chris Beauchamp, chief market analyst at IG, told the Guardian that the brutal session marked a dramatic turnaround from Wednesday and that, with AI fears still prominent, there was a risk of more selling. France 24 reported that European shares tumbled as global investors grappled with uncertainty over AI stocks after the Democrats’ sweeping victory.

The size of the scare was real. France 24 reported that a tech-led rout wiped nearly $3 trillion off the market value for S&P 500 companies before Nasdaq futures climbed as chip stocks gained ground. The same report tied the fear to Democratic control of the US Congress and tougher AI regulation.

The losses have spread beyond AI stocks, though the Guardian reported that most indices are still up for the year despite sharp losses on global stock markets. The initial market panic appears to have slowed for now.

That leaves Trump’s broad blame claim weaker than it sounds, while the concern about AI extends beyond a one-day wobble. Broad savers face market volatility, but the sourced pressure falls most clearly on technology, artificial intelligence and data-center exposure. Portfolios concentrated in those companies may face more regulatory and local-project risk if the reported concerns keep driving prices.

The next test is whether the selling stays where the policy risk is. If AI-linked tech and data-center companies keep lagging while broad indices settle, the election trade was a repricing of growth assumptions. If those shares rebound and the wider market weakens instead, Trump’s broader blame story will have better evidence than it has now.