Wall Street ends higher after Democrats win Congress

The U.S. stock market closed higher on Wednesday following Democrats' sweeping victory in the midterm elections. Wall Street saw a sharp increase as the political shift eased uncertainty and boosted risk appetite. Democrats secured control of both the Senate and House of Representatives, marking a significant win in Republican strongholds and a backlash against President Donald Trump.

Large technology stocks rose on expectations of a slower expansion of AI infrastructure, which could favor them competitively. Smaller companies facing potential challenges in AI infrastructure buildout saw a decline in shares. A significant factor driving the market's positivity was the decline in oil prices, fueled by bets that the change in power would hasten the end of the Iran war.

Terry Sandven, chief equity strategist at US Bank Wealth Management, stated that the election introduces a degree of gridlock in the economic backdrop, often favoring equity prices. Data center operators and AI heavyweights experienced differing trends, with cash-rich AI companies rising and chipmakers and data center operators falling after Democrats gained in key states like Texas and Georgia.

The AI trade faced headwinds due to expectations of a slowdown in expanding AI infrastructure, potentially easing cash demands on tech companies while pressuring operators and suppliers dependent on rapid buildout. Major AI companies such as Microsoft, Amazon, Alphabet, and Meta Platforms saw gains, while data center operators experienced substantial losses. The Philadelphia Semiconductor index hit a six-month low, while AMD rose as its data center sales surged.

Overall, the market's performance reflected a mix of optimism regarding political change and concerns about the impact on specific sectors, particularly AI and data center infrastructure. The S&P 500 ended the day at 7,688.62 points, the Nasdaq Composite at 25,736.51, and the Dow Jones Industrial Average at 53,356.12.