US stock futures fell sharply on Wednesday after midterm election results showed Democrats gaining control of both the House and Senate as voters delivered a stunning rebuke to President Donald Trump.
Nasdaq-100 futures fell as much as 2% overnight, while S&P 500 futures dropped around 1.2%.
The contracts pared some losses by Wednesday morning, with Nasdaq futures down 0.45% and S&P 500 futures lower by 0.35%. Dow futures were off 0.18%.
The US dollar weakened to a more than one-month low, while the 10-year Treasury yield declined toward 4.90% as investors moved into government bonds amid political and economic uncertainty.
Democrats set for big gains
Democrats secured several major victories in traditionally Republican states, including Texas, Kansas and South Carolina, giving the party control of the Senate.
Democrats are also set to take control of the US House of Representatives after flipping at least eight Republican seats.
In Texas, Democrat James Talarico defeated Republican Attorney General Ken Paxton, marking the first Democratic Senate victory in the state since 1988.
In Kansas, pastor Adam Hamilton defeated Republican incumbent Roger Marshall, ending a 94-year Republican hold on the Senate seat.
Democrats also flipped South Carolina, where Annie Andrews defeated Republican incumbent Darline Graham, and Ohio, where former Senator Sherrod Brown defeated Republican Jon Husted.
In North Carolina, former Governor Roy Cooper prevailed against Republican Michael Whatley. Georgia Senator Jon Ossoff also won reelection.
The results are being widely viewed as a setback for President Donald Trump, who had actively campaigned for Republican candidates.
Trump said he was willing to accept the election outcome and expressed openness to working with Democrats.
“Congratulations to the Democrats. They did a good job. They’ve been looking for this one for 11 years, and they finally got it,” Trump told Fox News.
He further added: “But I don’t view it as a hit on me. I think we’ve done … We’ve had the greatest two years in the history of the presidency.”
AI infrastructure spending faces fresh scrutiny
Technology stocks bore the brunt of the initial reaction as investors assessed the possibility of tighter oversight of artificial intelligence companies and data-center construction.
Democratic control of Congress could bring greater scrutiny of the energy and water consumption of large AI facilities, stricter permitting requirements and additional regulation of major technology companies.
Investors worry these measures could delay infrastructure projects and slow the expansion of AI computing capacity.
The issue is particularly important for technology companies investing hundreds of billions of dollars in data centers, chips and power infrastructure.
“A Democratic sweep of Congress would put pressure on tech and potentially bring regulatory pressure on everything AI,” said Jake Dollarhide, chief executive of Longbow Asset Management, as cited by Reuters.
Asian technology shares also come under pressure
The concerns spread across Asian markets, where technology and semiconductor stocks faced selling pressure.
Japan’s Nikkei 225 fell 1.6%, while South Korea’s Kospi reversed decline to gain 0.59%. Taiwan’s Taiex also lost 0.8%.
Shares of Samsung Electronics dropped, but SK Hynix remained steady even as investors assessed the possibility that tighter US regulation could affect demand for AI infrastructure and semiconductor supply chains.
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