From high-flying AI stocks to tariff-hit alcohol companies, the midterms shook up Wall Street

Democrats' overwhelming victory in the midterm elections caused significant shifts on Wall Street this week. The AI stocks experienced turbulence as concerns arose that a Democratic-controlled Congress might limit further development of data centers. Companies heavily invested in AI, such as Nvidia and Lam Research, saw their stocks fluctuate dramatically due to worries about possible slowdowns in construction, particularly in Texas.

Hyperscalers like Amazon, which fund the buildout of these data centers, managed to perform better under the new political climate.

Defence companies also faced volatility following the Democrats' sweep in the midterms. An end to the U.S.-Iran war, which is likely to occur with a Democratic Congress, could lead to reduced demand for weapons and weapons resupplies by the U.S. government. This possibility caused defense companies such as Northrop Grumman, Lockheed Martin, RTX, and General Dynamics to drop between 4% and 12% after Tuesday's elections.

Oil exploration and refining companies benefited from the ongoing U.S. war with Iran, leading to increased crude oil and gasoline prices. However, the prospect of a resolution to the war might result in lower oil prices and reduced profits for these energy companies. Exxon Mobil and Phillips 66, among others, experienced declines despite their overall positive year-to-date performance.

Companies focused on renewable energy, such as wind and solar power, could potentially see positive outcomes with a more accommodating Congress. Democrats are expected to have greater influence on funding, which could benefit green energy companies. Additionally, hospital stocks rose on hopes for restored or increased funding for government programs, including Medicaid and Affordable Care Act subsidies.

The shift in power in Congress may lead to more policies addressing affordability in healthcare, potentially boosting hospital revenues.