Stocks surge as Democrats win control of Congress

U.S. stocks surged Wednesday after Democrats won commanding midterm victories and took control of both houses of Congress, giving investors a clear election result even as questions grew about what the outcome could mean for the artificial intelligence boom.

The Dow Jones Industrial Average jumped more than 1,200 points, or 2.4%, shortly after the opening bell, CBS News reported. The S&P 500 rose 1.7% and the Nasdaq Composite gained 2.1%. The rally followed a sharp reversal overnight: Nasdaq 100 futures had fallen as much as 2.5% when the first results arrived Tuesday, according to NBC News.

Analysts said Democrats’ gains could constrain some of President Donald Trump’s policies, but they cautioned against expecting sweeping federal legislation. Democrats do not have a filibuster-proof Senate majority, and Trump can veto bills he opposes.

“The magnitude of the gains for the Democrats in the midterms does not change too much for the near-term policy outlook,” Stephen Brown of Capital Economics wrote in a note cited by CBS News. Deutsche Bank’s George Saravelos, meanwhile, said the combination of a large Democratic majority and Trump’s stated willingness to work with the opposition should reduce the risk of extreme policy outcomes.

Goldman Sachs economists said they expect Democrats to use fiscal deadlines to try to limit the war with Iran, roll back selected tariffs and reverse spending cuts enacted last year, NBC News reported. Oil prices, which NBC News said have climbed sharply this year because of the Iran war, fell more than 3% Wednesday.

The election also put a spotlight on data centers, which are central to the vast spending on AI that has helped lift technology shares. NBC News reported that companies including Amazon, Nvidia, Microsoft and Google parent Alphabet have committed hundreds of billions of dollars to AI models, data centers and related equipment. The Nasdaq 100 has risen 40% since Election Day 2024, compared with roughly 30% for the S&P 500, according to NBC News.

Several newly elected Democratic governors have called for pauses in data center construction, NBC News reported, including Keisha Lance Bottoms in Georgia and Amy Acton in Ohio. In Texas, Democrat Gina Hinojosa defeated Republican Gov. Greg Abbott. Goldman Sachs economists said Democratic wins at state and local levels could lead to short-term moratoria affecting about 45% of planned U.S. data center capacity expansion, while federal AI regulation would still need bipartisan support.

Jeff Buchbinder of LPL Research said the buildout would probably continue but could slow in key states, potentially increasing pressure on AI infrastructure stocks. Evercore’s Sarah Bianchi cautioned that the effect of any pause would depend on its terms, including whether existing projects are exempt or can move elsewhere.

Other analysts urged investors to keep the election in perspective. Corporate earnings and economic conditions have historically mattered more to broad market performance than which party controls Congress, the Wells Fargo Investment Institute said in a report cited by CBS News. The firm said it did not expect sweeping policy changes.