US stocks rose following the opening of markets on Wednesday after the Democrats achieved a "crushing victory" in the US midterm elections. The S&P 500 opened 1.1 per cent higher at 9.30am local time, the Dow Jones Industrial Average added 1.9 per cent, and the Nasdaq Composite jumped 1.1 per cent.
Analysts stated that the positive market sentiment reflected a reduction in investor concerns regarding abrupt policy shifts in Washington over the next two years. Because Democrats now control the US Congress, they have the power to slow down President Donald Trump’s agenda. Additionally, Trump’s acceptance of the results in comments to the media provided a boost to the equity market by appearing to remove worries about potential political disorder.
However, some stocks related to artificial intelligence declined due to heightened expectations that a Democrat-controlled Congress would increase scrutiny on the industry. Cloud-computing firm CoreWeave fell 6.7 per cent.
In a research note ahead of the election, Mathieu Racheter, head of equity strategy research with Swiss private bank Julius Baer, stated, “Uncertainty over future taxes and regulation could lead investors to demand a higher risk premium for US equities. We expect this uncertainty to become more prominent in late 2027 or early 2028, when the presidential campaign brings the prospect of a broader policy shift into focus.”
Prior to the election, analysts anticipated that a divided government would have a mixed impact on businesses, with AI and information technology companies potentially bearing the brunt of the pain. Tim Murray, a capital market strategist at global asset manager T. Rowe Price, said in a note, “AI and data centres may face greater bipartisan scrutiny, potentially weighing on sentiment and delaying some projects, even without significant new legislation. Financials, meanwhile, could see their deregulation tailwind fade as divided government creates friction around further policy changes.”
Specific companies saw significant declines: Elon Musk’s SpaceX fell 5.7 per cent to US$133.27, while Tesla dropped 4.7 per cent to US$379.8. This occurred despite Musk’s January comments regarding transforming Tesla into a physical AI firm and his recent comments about looking to merge Tesla with SpaceX.
