Democratic US midterm sweep hits tech stocks and dollar, bonds rally

Democrats won majorities in both chambers of the US Congress in the midterm elections, creating political gridlock for the remainder of Republican President Donald Trump's final term. Markets reacted quickly as results came in during Asian trading hours.

Technology stocks fell sharply across the region. Nasdaq 100 futures pointed to a difficult session for US technology shares, while South Korea's Kospi index dropped as much as 4%. Shares in Samsung Electronics and SK Hynix lost more than 5% before recovering some declines.

“A Democratic sweep of Congress would put pressure on tech and potentially bring regulatory pressure on everything AI.”

Japan's technology-heavy Nikkei 225 fell by almost 5%, and Taiwan's benchmark stock index dropped by as much as 3.4%. Treasury yields dipped, dragging the dollar lower, while US government bonds gained ground.

Investors fear tighter oversight of the technology sector and possible delays in building new data centres in the United States. The pace of AI infrastructure rollout could slow, particularly in Texas.

Renewable energy companies emerged as beneficiaries of the electoral shift, standing in contrast to the technology sector. Analysts said the direct economic implications may not be huge, though political fallout could be significant.

Christopher Hodge of Natixis said the wave appears under way and questioned how high and wide it will be. Jake Dollarhide of Longbow asset management said a Democratic sweep would pressure tech and bring regulatory pressure on AI growth. Tapas Strickland of Moomoo ANZ warned the AI infrastructure rollout could slow markedly.