Stock index futures fell late Tuesday after Democrats scored landslide victories in key races across the country. The scale of the blue wave surprised investors, many of whom had been expecting larger ripples.
S&P 500 futures, which track the broader market index, fell more than 0.5%, while Dow Jones Industrial Average futures fell more than 100 points.
Nasdaq 100 futures, which track the largest technology stocks, fell more than 1%.
Stocks fell further as the results were released, then recovered, with Nasdaq 100 futures falling as much as 2.5%.
“The results mark a stark rebuke to President Trump for diverting attention from economic issues and underscore voters’ insistence that Washington address the cost of living,” Evercore’s Sarah Bianchi wrote in a report late Tuesday, calling the results a “blue tsunami.”
JPMorgan analysts warned that such an outcome could trigger a “hypothetical sell-off in artificial intelligence due to increased regulation.”
“Possible new data center restrictions, as well as higher taxes on businesses and high earners” are all potential headwinds for “tech” companies.
On the other hand, the health care and clean energy industries may become “relative beneficiaries” of a Democratic-controlled Congress.
JPMorgan analysts also pointed to potential “investigation risks” for chief executives close to President Donald Trump.
Companies from Nvidia to Apple to NBC News parent Comcast have donated millions of dollars to Trump’s pet projects, especially his ballroom, and their leaders often appear with him at events.
Top Democrats have expressed interest in opening investigations into some of Trump’s programs in January, when their new congressional majority would give them subpoena power.
Democrats and the Data Center
Technology stocks have been crucial to the surge in U.S. stock market values over the past two years.
Trillion-dollar companies such as Amazon, Nvidia, Microsoft and Google parent Alphabet, as well as smaller data center startups, have invested billions of dollars developing artificial intelligence models, building data centers and buying the equipment needed to operate them.
The artificial intelligence craze has also been a major driver of the Nasdaq 100’s 40% rise since Election Day 2024.
But several Democrats who won key gubernatorial races on Tuesday called for a moratorium on data center construction in their states, including Keisha Lance Bottoms of Georgia and Amy Acton of Ohio.
In Texas, Democrat Gina Hinojosa defeated Republican Gov. Greg Abbott.
More than any other state, Texas has been a major focus for AI investors and a key market for data centers.
“We think one surprise that could spook markets is Abbott’s defeat in the Texas gubernatorial election,” Tobin Marcus, director of U.S. policy and politics at Wolff Research, wrote in a recent report.
Any large-scale slowdown or halt in data center construction could put at risk billions of dollars of investments held by many of the country’s top companies.
“Democratic wins in gubernatorial races in Texas, Ohio and Georgia — states that account for large shares of the U.S. project pipeline — mean new pauses and restrictions on data center development,” Evercore’s Bianchi wrote late Tuesday.
“2027 will be a tumultuous year and developers will be forced to adapt to the changing policy environment.”
Democrats are also expected to win Senate races in some battleground states where data centers have been a major issue during the campaign, including Georgia, North Carolina, Michigan, Ohio, Iowa and Kansas.
“Data centers in space are looking pretty attractive right now,” Elon Musk wrote on X. His SpaceX, worth trillions of dollars, sells data center capacity and develops artificial intelligence systems.
Musk, the world’s richest man, has spent hundreds of millions of dollars this cycle supporting Republicans and proposing to place the servers of artificial intelligence systems in orbit above the Earth. Most experts say the idea faces significant obstacles.
Artificial intelligence investors are nervous
Even before Tuesday’s expected results, markets have been worried for months about whether and how the boom in artificial intelligence and the massive investments associated with it will pay off.
On Friday, both the S&P 500 and the Nasdaq had their worst days since mid-June after Intel and Amazon, two major suppliers of artificial intelligence companies, reported mixed earnings results.
U.S. Treasury yields also edged lower on Tuesday evening as earnings were released, which could provide short-term relief to consumers looking to borrow, mortgage or refinance.
Yields fell as traders speculated that a slowdown in the artificial intelligence industry could lead to fewer companies tapping the bond market for additional funding.
On Monday, the Nasdaq 100 entered a correction, down 10% from its recent highs.
It was still there early Wednesday and poised to sink further.