Democrats won control of both chambers of the U.S. Congress in a landslide midterm election victory, according to reports. Across the country, Democrats scored wins in Republican strongholds, flipping at least seven Senate seats and picking up House seats in districts Republicans won comfortably in 2024. Multiple news organizations projected Democrats would win the House, while Decision Desk HQ projected Democrats had taken the Senate. Most notably, with Democrat Gina Hinojosa defeating incumbent Republican Governor Greg Abbott to become Texas's first Democratic governor since 1990 and the state's first Latino governor, markets immediately reassessed the risks facing the AI supply chain on the regulatory and construction fronts.
AI-related stocks came under broad pressure overnight, and the panic spread further into Asian markets today, with Japanese and South Korean chip stocks briefly leading global declines. Data showed that Nasdaq 100 futures, dominated by technology shares, fell as much as 0.8% at one point, more than double the decline in Dow Jones Industrial Average futures; the Technology Select Sector SPDR Fund (XLK.US) fell 2% on the Robinhood trading platform. Names with more direct exposure suffered steeper losses: high-risk emerging cloud service provider CoreWeave (CRWV.US), which relies on borrowing to build data centers, fell 7% on Robinhood, peer Nebius Group (NBIS.US) dropped 4%, Elon Musk's Texas-headquartered AI data-related company SpaceX (SPCX.US) fell 6%, and Oracle (ORCL.US) declined 4% on Robinhood.
The election risk also spilled over into global supply chains. Japan's Nikkei 225 index fell about 4% at one point during the session, dropping below the 61,000 mark for the first time in roughly three months; South Korea's KOSPI index fell as much as 4%, with Samsung Electronics and SK Hynix each down more than 5%. Advantest, SoftBank Group, Tokyo Electron, and Kioxia Holdings led the declines among AI and semiconductor-related stocks 鈥?these Asian manufacturers are core hardware suppliers for U.S. AI infrastructure buildout, and potential obstacles to data center expansion in Texas and across the United States directly cloud their demand outlook.
Meanwhile, cross-asset markets saw a classic "risk-off repricing": the dollar weakened across the board, with the Bloomberg Dollar Spot Index falling as much as 0.4%, its largest single-day drop in a month; U.S. Treasuries strengthened against the trend, with the 10-year yield falling about 7 basis points to 4.89%. Clean energy stocks were among the few beneficiaries 鈥?investors bet a Democratic sweep could slow or reverse Trump-era energy policies, and U.S. solar and grid-related names rose against the broader market.
Democrats Secure Congress with Overwhelming Majority
The Democratic landslide marks the first real check on Trump's power in Washington since he returned to the White House last year, with the party riding a wave of voter discontent over the cost of living. The incoming Congress is certain to investigate Trump himself, his administration, and his business interests, and to obstruct his legislative agenda. Democratic candidates are projected to flip Senate seats in Maine, Kansas, Texas, South Carolina, North Carolina, Iowa, and Ohio. Democrats need a net gain of four seats to win Senate control. Michigan's race has not yet been called, and Democrats are currently defending a seat there. In the House battle, Democrats won seats in states including Indiana, Iowa, Virginia, Texas, Nebraska, New Jersey, and Pennsylvania. Democrats are estimated to ultimately win 255 House seats, versus 180 for Republicans. House Republican campaign committee chairman and Representative Richard Hudson is projected to lose his seat in North Carolina, underscoring the severity of the Republican defeat. After the results emerged, Trump told Fox News he believed the Republican loss was "partly" due to price increases caused by the Iran war. But he defended his decision to go to war and said he did not plan to reshuffle his cabinet.
Texas Governor's Race Outcome Raises Data Center Risk
In the U.S. midterm elections, the Texas governor's race has already become a new risk point for the artificial intelligence (AI) trade. Because Texas is one of the largest planned data center development regions in the United States, and Hinojosa has promised a moratorium on new data center construction, markets immediately reassessed the regulatory and construction risks facing the AI supply chain, and AI-related stocks came under pressure overnight. According to reports, Abbott conceded on Tuesday night, called Hinojosa, and then told supporters, "Mathematically, we cannot win this election." U.S. media also declared Hinojosa the winner at 11:17 p.m. Eastern Time. Hinojosa made opposition to data center construction one of her core campaign platforms, and in ads accused Abbott of "working for" Elon Musk, accompanied by images of the two together. She explicitly proposed pausing new data center construction, imposing stricter regulation on water and electricity use, and ending tax incentives.
Texas is seen as a bellwether for government restrictions on AI data centers. The state is set to account for more than 25% of planned U.S. data center capacity by 2030; Wells Fargo estimates that 27% of planned data center gigawatts are located in Texas. Raymond James analyst Ed Mills said in a pre-election report that the Texas governor's race is especially important for the next phase of the AI trade, and that a strong Democratic showing in Texas "could signal a broader election wave while heightening concerns about moratoriums and stricter AI regulation in the nation's largest planned data center development region." Wolfe Research analyst Tobin Marcus noted in pre-election analysis that Texas is the only state large enough, with sufficiently distinct candidate differences, to potentially produce a real impact. Bank of America said this is one of the elections with the greatest impact on the entire utilities sector. The bank's well-known investment strategist Michael Hartnett even warned earlier this year that Democrats winning the Senate, combined with taking the Texas governor's office, could trigger a stock market plunge of more than 10% by year-end. Abbott was seeking a fourth term as governor and said last year he wanted Texas to become "the center of AI development." He recently announced his own moratorium and said he supported stricter requirements on electricity and water use. But Hinojosa quickly accused Abbott of "lying," calling his new proposal nothing more than an "election-year pause."
The election also reflects a sharp national shift in sentiment against data centers in recent months. A September UMass Amherst poll showed nearly two-thirds of Americans oppose building AI data centers in their local areas, with only 11% of voters welcoming them; 76% of Democrats and 52% of Republicans opposed construction in their own communities. At least 50 data center-related local ballot measures also went before voters in 13 states, from Arkansas to Wisconsin. Markets had already expected Democrats to win the House and possibly even control the Senate, but the flipping of the Texas governor's office was seen as the biggest blow to tech stocks; as signs of a Hinojosa victory emerged, related stocks were sold off overnight. Horizon Investments chief investment officer Scott Ladner said, "The thing that could really move the market is Abbott losing Texas," because "where these data centers get built is a legitimate question." He said Texas is fertile ground for data centers, and if Abbott loses, "I think that fertile ground basically becomes barren, and that will be a challenge."
The Democratic victory in Texas adds pressure to an AI trade that was already under strain while leading the bull market. The Nasdaq 100 entered correction territory at the end of October as markets grew increasingly worried about slowing data center spending growth among large hyperscalers and private AI giants OpenAI and Anthropic. Wells Fargo chief equity strategist Ohsung Kwon warned in a report that a Democratic win in the Texas governor's race could become a "left-tail event" for the AI trade, meaning an extreme negative scenario. Beyond Texas, Democrats are also expected to win or hold governorships in other key data center states 鈥?Georgia, Pennsylvania, and Ohio. Wells Fargo estimates Georgia accounts for 7% of total planned U.S. data center gigawatts, with Ohio and Pennsylvania at 5% each. Optimal Advisory's Washington policy team wrote this week that data centers were a popular economic development tool in 2024 and 2025, but had become nearly "pariahs" by the time midterm campaigning heated up; the midterms may send a signal to local and state officials that there is political gain in blocking, delaying, and/or raising the cost of data centers.
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