Democrats have secured control of both the Senate and the House in the US midterm elections, a result that hands the party the power to stall legislation the president wants to push through in his final two years in office. But the president retains veto power, so the most likely outcome is more gridlock and fewer big policy swings. Foreign policy largely remains in the president's hands, which is why some diplomats expect little change on the world stage.
For investors, the immediate focus is on what this political shift means for the economy and markets. One area drawing particular attention is the artificial intelligence (AI) boom, which has driven a massive buildout of data centers across the US. Democratic victories in several governors' races could now throw up new obstacles for those projects.
Speed bumps in the AI race
According to analysis from Charlie Pullan, a CFA analyst, Democratic wins in governors' races could see around half of planned US AI data center additions face tougher local scrutiny. That's a significant chunk of the multitrillion-dollar AI infrastructure buildout that has been a key driver of stock market gains in recent years.
Texas alone accounts for almost 30% of US data center capacity expected to come online in 2028. The state's governor-elect has called for an immediate pause on new construction. Georgia's governor-elect wants a similar halt, while Ohio's has said developers must meet certain conditions before building. These roadblocks could slow the pace of AI expansion, which would have ripple effects across the tech sector.
On Wednesday, the day after the election, some AI-related stocks felt the pressure. Chipmakers like Nvidia and data center operators fell, as investors weighed the risk of delayed projects. However, their big tech customers—Microsoft, Alphabet, and Amazon—rose, suggesting that the market sees the demand for AI services as resilient even if infrastructure buildout slows.
What it means for investors
For everyday investors, the key takeaway is that political changes can have real consequences for specific industries. The AI boom has been a major driver of stock market performance, and any slowdown in data center construction could hit the companies that build and operate them, as well as the chipmakers that supply them.
But it's not all bad news. The big tech companies that use these data centers—often referred to as 'hyperscalers'—may actually benefit from a slower buildout if it reduces oversupply and keeps pricing power in their favor. That's why their stocks rose even as the infrastructure names fell.
Investors should also keep an eye on the broader market. Historically, the S&P 500 has risen in the six months after every US midterm since 1950. Part of that is relief: investors get a clearer view of policy. But this time could be different. The S&P 500 has already notched double-digit gains in 2026, flipping the usual midterm-year script, where stocks tend to wobble before the vote. Add in AI spending jitters and the ongoing war in the Middle East, and there's enough uncertainty to potentially buck the trend.
For now, though, investors seem unfazed. The S&P 500 rose on Wednesday—not a bad start for a potential midterm bump. But as the AI data center story develops, and as political gridlock sets in, the path ahead may not be as smooth as history suggests.
Related: Big tech relief rally on AI spending hopes and Asia tech stocks slide on AI spending fears.
