The Democratic Party swept away both houses, and the Texas governor turned into heaven! AI trading experienced a “left-tail incident”, and the suspension of data centers shocked global chip stocks

The Zhitong Finance App learned that the Democratic Party won control of both houses of the US Congress with an overwhelming victory in the US midterm elections. According to reports, across the US, the Democratic Party won the Republican Party's vote, reversed at least seven seats in the Senate, and won a seat in the House of Representatives in the constituency easily won by the Republican Party in 2024. Several news agencies predict that the Democratic Party will win the House of Representatives, while Decision Desk HQ predicts that the Democratic Party has taken the Senate.

What is most noteworthy is that as Democrat Gina Hinojosa defeated current Republican Governor Greg Abbott to become Texas's first Democratic governor since 1990 and the state's first Latino governor, the market immediately re-evaluated the risks faced by the AI industry chain on the regulatory and construction side. Overnight, AI-related stocks were generally under pressure, and panic spread further to the Asian market today. At one point, Japanese and South Korean chip stocks led the global decline.

According to the data, Nasdaq 100 futures, which are mainly technology stocks, once fell 0.8%, more than double the Dow Jones Industrial Average futures; the technology industry select index ETF-SPDR (XLK.US) fell 2% on the Robinhood trading platform. The targets that are more directly related have dropped even more: CoreWeave (CRWV.US), a high-risk emerging cloud service provider that relies on loans to build data centers, fell 7% at Robinhood, its counterpart Nebius Group (NBIS.US) fell 4%, SpaceX (SPCX.US), an AI data-related target headquartered in Texas by Musk, fell 6%, and Oracle (ORCL.US) fell 4% at Robinhood.

Election risks also spill over to global supply chains. Japan's Nikkei 225 index once plummeted by about 4% in the intraday period and fell below the 61,000 point mark again after a lapse of about three months; South Korea's KOSPI index once fell 4%, and Samsung Electronics and SK Hynix all fell by more than 5%. Individual AI and semiconductor-related stocks such as Edwin Testing, SoftBank Group, Tokyo Electronics, and Kioxia Holdings led the decline — these Asian vendors are the core hardware suppliers for AI infrastructure construction in the US, and the potential blocking of data center expansion in Texas and across the US directly overshadowed their demand prospects.

At the same time, there was also a typical “safe-haven repricing” at the cross-asset level: the US dollar weakened across the board, and the Bloomberg dollar spot index once fell 0.4%, the biggest one-day decline in a month; US bonds bucked the trend, and the 10-year yield fell by about 7 basis points to 4.89%. Clean energy stocks, on the other hand, have become few beneficiaries — investors are betting that the Democratic Party's sweep could slow or reverse the energy policy of the Trump era, and US stocks bucked the trend of solar and grid-related targets.

Democrats overwhelmingly control Congress

The Democratic Party's big win marks Washington's first real check and balance of power since Trump returned to the White House last year. The party took advantage of voters' growing dissatisfaction over the cost of living. The incoming Congress is bound to investigate Trump himself, his government, and commercial interests, and block his legislative agenda.

According to predictions, Democratic candidates will reverse Senate seats in Maine, Kansas, Texas, South Carolina, North Carolina, Iowa, and Ohio. The Democratic Party needs a net increase of four seats to gain control of the Senate. The election situation in Michigan has yet to be revealed, and the Democratic Party is currently defending one seat in the state.

In the battle for the House of Representatives, the Democratic Party won seats in states such as Indiana, Iowa, Virginia, Texas, Nebraska, New Jersey, and Pennsylvania. It is estimated that the Democratic Party will eventually get 255 seats in the House of Representatives, while the Republican Party will have 180 seats. Representative Richard Hudson, chairman of the House Republican Campaign Committee, is predicted to lose his seat in North Carolina, which highlights the heavy loss of the Republican Party.

After the election results were revealed, Trump told Fox News that he believed “part” of the Republican Party's defeat was due to rising prices caused by the war in Iran. But he defended his decision to go to war and said he had no plans to adjust his cabinet.

Texas gubernatorial election results drive data center risks

In the US midterm elections, the Texas gubernatorial election results have become a new risk point for artificial intelligence (AI) transactions. Since Texas is one of the largest data center development regions in the US plan, Hinojosa promised to suspend the construction of new data centers, and the market immediately re-assessed the regulatory and construction risks faced by the AI industry chain, and AI-related stocks were under pressure overnight.

According to reports, Abbott admitted losing the election on Tuesday night and called Hinojosa, then told supporters “mathematically we can't win this election.” The US media also announced Hinojosa's victory at 11:17 p.m. EST.

According to information, Hinojosa took opposition to data center construction as one of the core ideas of the campaign and accused Abbott of “working for” Elon Musk in the advertisement, with images of the two in the same frame. She clearly proposed plans such as suspending construction of new data centers, implementing stricter supervision of water and electricity usage, and ending tax incentives.

Texas is seen as a weather vane for the government's policy of restricting AI data centers. The state will account for more than 25% of the planned US data center capacity by 2030; Wells Fargo estimates that 27% of the planned data center gigawatts will be located in Texas.

Raymond James analyst Ed Mills said in a pre-election report that the Texas gubernatorial election is particularly important for the next phase of AI transactions. The strong performance of the Democratic Party in Texas “may indicate a broader election wave, while also heightening concerns about the implementation of a moratorium and stricter AI regulations in the country's largest planned data center development area.”

Wolfe Research analyst Tobin Marcus pointed out in the pre-election analysis that Texas is the only state that is large enough and that the differences in candidates are obvious enough to have a real impact.

Bank of America said it was one of the elections that had the greatest impact on the entire utility sector. Michael Hartnett, a well-known investment strategist at the bank, even warned earlier this year that the Democratic Party's victory in the Senate, plus winning the position of Texas governor, could cause the stock market to plummet by more than 10% before the end of the year.

Abbott was seeking a fourth term as governor at the time, and last year he said he wanted Texas to become a “center for AI development.” Recently, he also announced his moratorium and expressed support for more stringent requirements on the use of electricity and water.

However, Hinojosa quickly accused Abbott of “lying,” saying that his new proposal was nothing more than a “election year suspension.” The election also reflects a sharp shift in national sentiment against data centers in recent months.

According to UMass Amherst's September poll, nearly two-thirds of Americans oppose building AI data centers locally, and only 11% of voters welcomed them; 76% of Democrats and 52% of Republicans opposed building them in their respective communities. In 13 states, from Arkansas to Wisconsin, at least 50 local referendums relating to data centers have also entered the voting process.

The market had previously anticipated that the Democratic Party would win the House of Representatives and possibly control the Senate, but the change of hands as Texas governor was seen as the biggest blow to tech stocks; as signs of Hinojosa's victory became apparent, related stocks were sold off overnight.

Scott Ladner, chief investment officer of Horizon Investments, said, “What could really drive the market is Abbott losing to Texas” because “where to build these data centers is a reasonable question.” He said that Texas is fertile ground for data centers, and if Abbott fails, “I think this fertile ground will basically become barren, which will pose a challenge.”

The victory of the Texas Democratic Party put pressure on AI deals that are already under pressure and are leading the bullish market. The Nasdaq 100 index entered a correction range at the end of October as the market increasingly worried about a slowdown in data center spending growth among large hyperscale cloud vendors and private AI giants OpenAI and Anthropic.

Ohsung Kwon, chief stock strategist at Wells Fargo Bank, warned in the report that the Democratic Party's victory in the Texas gubernatorial election could become a “left-tail incident” for AI transactions, or an extremely negative scenario.

In addition to Texas, the Democrats are also expected to win or retain governor positions in other key data center states — Georgia, Pennsylvania, and Ohio.

Wells Fargo estimates that Georgia accounts for 7% of the total gigawatt of the US planned data center, while Ohio and Pennsylvania each account for 5%. The Optimal Advisory Washington policy team wrote this week that data centers were popular economic development tools in 2024 and 2025, and were almost “abandoned” by the time the midterm election campaign heats up; the midterm elections could signal to local and state officials that there are political benefits to stopping, delaying, and/or increasing data center costs.