U.S. stock futures steady as Democrats take Congress, tech regulation fears weigh

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Us stock futures steady as democrats take congress

Highlights

U.S. stock index futures recover from steep initial declines after Democrats secure control of both chambers of Congress, signaling a new era of divided government.
Nasdaq-100 futures drop as much as 2.4% and S&P 500 futures fall 1.4% early, but by 3:13 a.m. ET Dow E-minis rise 237 points, S&P 500 E-minis add 11.25 points, and Nasdaq 100 E-minis gain 72.75 points.
Tech and AI-related shares, including Amazon.com, Alphabet, Microsoft, Meta Platforms, and SpaceX, trade lower amid fears of stricter regulation, higher taxes, and scrutiny over capital spending and environmental impact.

Election outcome reshapes market expectations

As reported by Reuters, U.S. stock index futures stabilize on Wednesday after an initial sharp drop as investors digest Democrats' sweeping midterm victories. The party takes control of both chambers of Congress, marking major gains in Republican strongholds and setting up a new period of divided government in Washington after two years in which a Republican-controlled Congress rarely acts to check President Donald Trump.

Global equities swing between gains and losses as markets weigh the prospects of tougher regulation, higher taxes and increased oversight of areas including artificial intelligence and cryptocurrencies. Aidan Yao, senior investment strategist for Asia at the Amundi Investment Institute, says the election carries broad implications for the AI trade and for the outlook on U.S. growth, inflation and monetary policy if restrictions on the theme increase.

U.S. markets initially fall on the election results, with Nasdaq-100 futures dropping as much as 2.4% and S&P 500 futures down 1.4%. By 3:13 a.m. ET, however, Dow E-minis rise 237 points, or 0.46%, S&P 500 E-minis add 11.25 points, or 0.15%, and Nasdaq 100 E-minis gain 72.75 points, or 0.26%.

Tech and AI sectors face renewed scrutiny

Technology-linked shares remain under pressure as investors reassess the outlook for companies tied to AI infrastructure and spending. Shares of hyperscalers Amazon.com, Alphabet, Microsoft and Meta Platforms trade lower on the Tradegate platform in Europe, while Elon Musk's SpaceX drops more than 4%.

Democrats also make inroads in Texas and Georgia, two key states for data centers, highlighting the political sensitivity around the rapid buildout of AI infrastructure. As large data centers proliferate, concerns persist over environmental strain, electricity costs and the wider effects of the technology itself.

The AI trade is already losing momentum as investors grow more cautious about soaring capital spending by Big Tech and limited evidence of adequate returns. That pressure deepens after the Nasdaq-100 confirms on Monday that it has entered a technical correction.

In our earlier article on the Nasdaq 100’s slide despite strong SpaceX results, we noted that tech shares remained under heavy selling pressure even as AI sentiment stayed resilient. The index was trading below key short- and medium-term moving averages, keeping momentum tilted toward sellers and putting focus on whether support levels could hold or give way to deeper downside.

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