AI focus
Summary of article:
- Main point one:After the blue wave, the main focus of the market turned to the politics of checks and balances, with Wall Street betting that policy risks would ease.
- Point 2:Divergence in the AI market has intensified, with funds being used to buy big technology and sell chip and data center stocks.
- Key point three:Oil prices, interest rates and regulatory expectations change together, affecting financial, defense and Musk concept stocks.
The US midterm elections set off a “blue wave” for the Democratic Party.wall Street The stake is not just on a change in Congress, but also on a possible change in the main force supporting the market. Investors hope Congress can rein in checks and balancestrump Expand Expenses and Promotionswhite House Managing to end the war in Iran also cools AI expansion. Funds moved into big technology, consumer and cyclical stocks, while chips, data centers and Musk’s shares declined. However, whether the market has changed its main theme still depends on policies and corporate profits.
With Democrats gaining control of both houses of Congress, Trump will face greater resistance in promoting major bills and increasing fiscal spending. Investors hope mutual restraint from both sides could reduce policy changes and make passage of new rules less likely.
Trump said he accepted the election results, which also provided relief to markets that were worried about post-election conflict. However, the new Congress will not take office until January next year. Trump still has executive power and can use tariffs or military action at any time to influence the market again.
After Vice President Vance blamed the war with Iran for the Republican defeat, traders are betting that the White House will become more aggressive in seeking a diplomatic solution to return oil supplies to global markets. Homebuilders, auto, bank and retail stocks rose, while defense stocks declined, driven by a decline in oil prices and Treasury yields.
The market expects that the cooling of the war and restrictions on fiscal spending will reduce pressure on inflation and interest rates, which will benefit ordinary companies and households. However, the decline in oil prices reflects expectations and does not mean that the war is near an end.
After the Democratic Party wins governorships in major data center cities like Texas and Ohio, electricity prices, water usage and the impact of construction on local residents will be subject to greater scrutiny. Whether AI companies can continue to expand rapidly has become the focus of market reevaluation.
Investors sold Huida, Micron and data center suppliers and bought Microsoft, Alphabet and Amazon. Analysts believe the slowdown in expansion could ease spending pressure on big technology companies, and could also limit new supply and increase prices charged to customers. Suppliers and new cloud players that rely on rapid expansion for growth may face ordering and repayment pressure.
This wave of differentiation shows that the market is starting to pay more attention to a company’s cash, financing capabilities, and investment returns rather than shopping around until it gets exposure to AI.
Hedge funds reduced their positions in US stocks and increased their short bets ahead of the election. Short orders were near five-year highs, and funds trading based on models also reduced their holdings. The election did not cause a major shock to the market and investors remained risk-averse and covered positions, which was part of the driving force for Wednesday’s gain.
JPMorgan Chase believes that after the selling pressure on technology stocks and the reduction of leverage by hedge funds in October, the short-term rebound conditions have improved, and it is recommended to invest in technology and cyclical stocks at the same time, with an emphasis on the latter. Citadel Securities believes that corporate profits are still supported, and investors’ shareholding is not high, so there is still room for entry before the end of the year.
