Global equity markets retreated and the dollar touched a one-month low on Wednesday as Democrats secured control of both the Senate and the House in the U.S. midterm elections. The results sparked concerns that the rapid expansion of the artificial intelligence sector could be hindered by increased regulatory oversight.
In a significant blow to President Donald Trump, Democrats achieved victories in Senate races across South Carolina, Texas, and Ohio, capturing majorities in both chambers of Congress that extended into traditional Republican strongholds.
The scale of the party’s success was highlighted by wins in districts long viewed as reliably conservative, a political shift that caught many market participants by surprise.
AI-related stocks declined rapidly. This trend pressured the dollar, while <a Tighter regulatory scrutiny of technology and AI companies along with the higher likelihood of political gridlock beckon with a Democrat sweep," said Prashant Newnaha, senior rates strategist at TD Securities in Singapore.
The AI boom has been a primary driver of global market growth in recent years, fueled by massive capital expenditure from tech giants racing to construct data centers and increase computing capacity. Consequently, investors have become highly sensitive to any developments that might threaten the technology’s swift expansion.
The <a Looks like investors are buying the dip after the initial knee-jerk selloff," said Charu Chanana, chief investment strategist at Saxo. "The <a t changed, but markets may be recognising that political gridlock doesn't necessarily mean weaker corporate earnings."
In Asia, the majority of the selling pressure hit AI stocks, with chipmakers such as Samsung, SK Hynix, and TSMC falling sharply before recovering some ground. The KOSPI was last trading slightly higher after an earlier 3% drop.
George Efstathopoulos, portfolio manager and co-head of multi-asset research at Fidelity International, noted that he had reduced overall equity exposure and increased holdings in defensive sectors like utilities, though he believes now is an opportune time to gradually rotate back into technology.
“The midterms are a clearing event that can allow investors to focus on sectors where fundamentals and pricing have diverged. Technology is one of them.”
