US midterm sweep sparks a brief rebound, then an AI-led selloff

what happened

According to marketindex.com.au, the size of the Democratic sweep in the US midterms caught analysts and markets off guard. Nasdaq and S&P 500 futures slid sharply on Wednesday afternoon, then turned positive by the open, and the Dow finished up 1,569 points, or 3.0%. Oil dropped 9%, as traders bet that a Democratic Congress would limit President Trump's ability to keep the war going.

The gains did not last. On Thursday the S&P 500 lost 4.3%, its weakest session since April 2025, and the Nasdaq sank 5.5% to close in correction territory. Chipmakers and AI names led the decline as investors priced in tighter Democratic oversight of data centres, while soft outlooks from Qualcomm and Arm added pressure. UBS estimates that roughly 30% of the US data centre capacity expected by 2028 faces possible construction pauses, and Texas on its own represents 18GW.

why it matters

For markets, the story suggests Big Tech's capital spending may peak earlier, around 2027 rather than closer to 2030. The VIX jumped 69.5% to 28.1, its third-largest one-day gain since 1990. Historically, sharp volatility spikes have often been followed by higher S&P 500 levels a month later, though that is no guarantee. UBS sees lower oil prices and interest rates partly cushioning the blow.

market impact

Nasdaq and AI stocks: pressure from data-centre curbs; oil: lower on hopes of less support for the war

• ▼Nasdaq pressure down — investors price in a slower data centre buildout and weaker AI spending
• ▼Semiconductors pressure down — soft guidance from Qualcomm and Arm plus unwinding of AI positions
• ▼Oil pressure down — hopes that a Democratic Congress will curb support for the war
• ▲VIX pressure up — volatility rises as stocks sell off sharply

instruments

on polymarket