Investors split the AI trade as data centre operators slide and megacaps climb
Democrats won majorities in both the House of Representatives and the Senate in the US midterm elections, and American equities rallied the following session on Wednesday, November 4.
The Dow Jones Industrial Average rose 1,569.40 points, or 3 percent, to 53,356.12, the S&P 500 gained 119.70 points, or 1.6 percent, to 7,688.62, and the Nasdaq Composite added 364.50 points, or 1.4 percent, to 25,736.51, Reuters reported.
CNBC reported the Dow closed above 53,000 for the first time since Sept. 8 and posted its best day since April 9, 2025.
US President Donald Trump told The New York Times he was “absolutely willing” to accept the results and told The Wall Street Journal that he and Republicans would work with Democrats.
Terry Sandven, chief equity strategist at US Bank Wealth Management in Minneapolis, told Reuters that “stocks are sharply higher today as election clarity reduces uncertainty.”
Sandven said the election introduces a degree of gridlock to the economic backdrop, and that gridlock oftentimes proves favourable for equity prices.
Jason Pride at Glenmede told Bloomberg that “gridlock is good,” adding that markets have historically fared better when no single party can push legislation through on party-line votes.
Brian Jacobsen, chief economic strategist at Annex Wealth Management, told The Associated Press that “earnings trump elections.”
US Vice President JD Vance blamed the war with Iran for the Republican losses.
Brent crude fell 8.7 percent to US$94.62, its lowest level in two months, according to AP, and the S&P 500 energy sector index dropped 4.8 percent, Reuters reported.
Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, told CNBC that “there’s just going to be even more pressure to end the war.”
Boockvar said the American people have obviously expressed their displeasure with inflation and the price of gasoline, amongst other things, and that this may push toward an end to it.
ExxonMobil fell 4.6 percent and ConocoPhillips dropped 5.2 percent, AP reported, while First Solar rose 4.6 percent and Enphase Energy climbed 3.7 percent.
Lockheed Martin fell 6.9 percent, Northrop Grumman 4.5 percent and General Dynamics 2.6 percent, with Reuters attributing the declines to the tougher path now facing Trump’s US$1.5tn defence budget request.
The split carried through from the overnight reaction that hit AI names from Tokyo to Wall Street.
Microsoft rose 6.7 percent, Amazon.com added 6.1 percent and Alphabet gained 3.2 percent, Reuters reported, while Hut 8 fell 23 percent, IREN 11 percent, Core Scientific 10 percent and Applied Digital 6.7 percent.
The Philadelphia SE Semiconductor index dropped 3.1 percent to a six-month low.
Nvidia sank 3.1 percent and CoreWeave dropped 9.9 percent, according to AP.
Scott Chronert, head of US equity strategy at Citi Research, said headwinds for the AI trade are already clear.
In comments to Reuters, Chronert said a shift in the pace of the data centre buildout begins to change the fundamental trajectory for many of the suppliers tied to it.
Gina Hinojosa, who won the Texas governor’s race, has pledged an immediate moratorium on data centres in the state, CNBC reported.
The yield on the 10-year US Treasury dropped to 4.88 percent from 4.95 percent late Tuesday, AP reported.
Stocks rose 2 percent in Paris, 2.2 percent in Shanghai and 1.8 percent in London, while Japan’s Nikkei 225 fell 1.4 percent.
