How the Midterm Elections Affect the AI Infrastructure Build-Out

The Nasdaq fell 5.5% in a single session in the days after the U.S. midterm elections, as investors weighed the risk that a Democratic-controlled Congress could slow the build-out of AI data centers and wider AI infrastructure. The midterm elections affect AI stocks through that policy question, yet the Nasdaq recovered almost 4% over the next two sessions and ended the four days after the vote flat. Chip stocks led the rebound, with the Philadelphia Semiconductor ETF recording its largest one-day gain since July. The policy question remains open, while the market reaction so far amounts to a selloff that did not follow through.

Fiona Cincotta, StoneX Senior Market Analyst, covers macroeconomics across equities, forex, commodities and crypto assets, with a focus on UK, European and U.S. market themes. That coverage gives insight into what is driving the Nasdaq and the AI trade, from U.S. election politics to chip stocks and Nvidia.

Key Themes

• The Nasdaq fell 5.5% in one session, then recovered almost 4% over the next two.
• Investors are weighing the risk that a Democratic-controlled Congress slows the AI data center build-out.
• Nvidia fell almost 5% on company-specific news while chip stocks posted their best day since July.

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AI Infrastructure Build-Out Draws Scrutiny After the Midterm Elections

The AI infrastructure build-out became a policy question after the U.S. midterm elections, as investors assessed what a Democratic win and takeover of Congress could mean for AI data center development. Cincotta says investors were gauging if the result would hit the build-out and "potentially lead to a slowdown in AI development". Uncertainty over the build-out arrived alongside a 5.5% one-session fall in the Nasdaq in the days after the vote. Consequently, the AI trade now carries a policy dimension, with the Nasdaq responding to election outcomes as well as to company news.

Nasdaq Selloff Fails to Follow Through After the Midterm Vote

"Over the past four days, the index is actually flat. So that does suggest that was quite a lot of knee-jerk reaction," Cincotta says of the Nasdaq after the U.S. midterm elections. The Nasdaq fell 5.5% in a single session before recovering almost 4% over the following two, posting its strongest daily gain in months along the way. The rebound held even as Nvidia, the bellwether for the AI trade, fell almost 5% on company-specific news. For traders, the gap between the headline fall and the flat four-day result shows how quickly the initial reaction to the election reversed.

AI Trade Sentiment Shows Up First in Chip Stocks and Nvidia

AI trade sentiment surfaces first in the Philadelphia Semiconductor ETF, whose daily moves show how broadly optimism toward AI is spreading across chip stocks. Nvidia's share price acts as the bellwether, revealing if company-specific news stays contained or spills into the wider sector. Nasdaq futures add a macro layer, reflecting Federal Reserve rate expectations alongside the AI story. According to Cincotta, "The Nasdaq has actually managed to recover and that is despite declines in Nvidia."

--- Written by Frédéric Guétin, StoneX Media Producer

--- Expert: Fiona Cincotta, StoneX Senior Market Analyst