U.S. stocks rise as election swings AI, defense and energy shares

Gubernatorial wins may slow data-center construction pace

On Wednesday, U.S. stock indexes opened higher after Tuesday’s Democratic sweep. The S&P 500 and Nasdaq Composite each opened more than 1% higher, while the Dow Jones Industrial Average jumped more than 2%, or 1100 points. Investors embraced the prospect of divided government, but sector trading split as state election results threatened the AI build-out.

For a same-day benchmark, FRED’s raw Nov. 4 readings were 25372.01 for the Nasdaq Composite, 51786.72 for the Dow Jones Industrial Average, and 7541.4 for the S&P 500.

President Trump’s remarks to news outlets that he would work with Democrats were welcomed by investors. The prospect of gridlock between different parties in charge of the White House and Congress reassured some investors concerned about runaway spending in Washington. Ron Albahary, chief investment officer of multifamily office LNW, said: “I also think equity investors are breathing some kind of relief that the president is going to accept the results.”

While markets tend to prefer political gridlock, Albahary was not ruling out the possibility that a lame-duck president could look to cut bipartisan deals with Democrats in Congress to burnish his legacy. “One risk would be AI regulation reining in the AI build-out at the federal level,” he said.

The AI trade, which had powered markets all year, faced more immediate risk from state election results. Democratic gubernatorial wins in five states key to data-center development threatened the pace of new construction. In Texas, Ohio and elsewhere, the focus shifted further toward what those projects mean for nearby power costs, water usage and more — and away from the competition among AI’s hyperscalers and between the U.S. and China.

In Texas, home to roughly a quarter of the U.S. data-center capacity expected to come online by 2030, an upset win by Democrat Regina Hinojosa in the governor’s race drew the most attention. She had called for an immediate moratorium on data centers until lawmakers find a way to give communities a seat at the table, in a state where companies ranging from Oracle to landowner Crusoe plan large-scale developments.

In Georgia, Democrat Keisha Lance Bottoms, a supporter of a data-center pause, won the governor’s race. Amy Acton, who backs a “conditional moratorium,” was declared the winner in Ohio, where voters also delivered a string of defeats to the AI trade in local referendums on specific data-center projects.

“Data centers in space looking pretty appealing right now,” Elon Musk wrote in an early Wednesday post on X, his social-media platform. By midmorning, shares of SpaceX, Musk’s rocketry and AI company, had slumped by more than 4%. Tesla, his electric-car company, also fell. More speculative AI stocks, including Coreweave, fell, as did power producers such as NRG Energy and other suppliers for the construction boom. Nvidia traded in the red.

Bob Elliott, chief executive at Unlimited Funds, said, “In a world where the AI boom is everything, the implications are enormous.” He added, “The election is a warning call for an industry that has largely built on expectations of unchecked growth ahead.”

More broadly, investors opened the new era in Washington with hopes that Congress would return to its traditional role as a check on presidential power. The Wall Street Journal reported that the Democrats’ sweep was likely to stymie major legislative actions for the remainder of Trump’s term and increase pressure on the White House to end the war in Iran and its disputes with trading partners.

Defense contractors RTX, Lockheed Martin and Northrop Grumman fell. A divided government could make it harder to approve military spending. Trump still has significant power to move markets through renewed military campaigns against Tehran and tariff policy on certain industries, especially before Democrats are sworn in. “Several of the administration’s priorities, including trade, immigration, foreign policy, and deregulation, can be pursued or influenced largely through executive authority,” Glenmede analysts told clients Tuesday.

Government bond yields ticked lower Wednesday, with the 10-year Treasury yield dropping to 4.92% from 4.95% a day earlier.

Shares rose across industries expected to benefit from Democrats’ return to power. Turbine makers Vestas and Nordex, offshore-wind company Orsted and solar-power names including First Solar, OCI Holdings and SMA Solar jumped in early trading as investors hoped the Democratic wave would counter Trump administration policies that have hurt renewable-energy firms.

Healthcare also received an early boost. Centene, HCA Healthcare and Universal Health rose in early trading as investors anticipated a Democratic Congress would have more leverage to strike a deal with President Trump to boost spending on Obamacare.

Trump Media, the president’s social-media firm, fell sharply after Wednesday’s open and was on pace for an all-time low. The company has often traded in tandem with Trump’s political fortunes.