Author: Maverick, Gelinghui
Today, global markets went through a complete emotional roller coaster in just a few hours.
On the domestic side,A shares were sluggish in the morning session, but afternoon capital surged into the technology sector, with the Sci-Tech 100 soaring 10.14%, marking the largest one-day gain in nearly two years; the ChiNext Index surged 6.4%, setting a new one-day record for the past year.
On the U.S. stock side, Nasdaq futures briefly fell more than 2%, and S&P 500 futures dropped over 1%. The initial selling was very precise, not indiscriminate panic.CoreWeave dropped as much as 7%, with Nvidia, Google, Amazon, and TSMC all losing more than 2%.
Then, the sentiment flipped, with the index rebounding from a significant drop to a slight gain, U.S. Treasuries strengthened, and gold returned to above 4000 dollars.
The South Korean composite index was even more dramatic, bouncing back sharply from a drop of 4%.
A historic sweep by the Democratic Party resulted in a sharp fall followed by a deep V reversal.
The most talked-about figure throughout was still Musk.
He spent 445 million dollars for the Republican Party, firmly holding the title of "largest individual donor", only to face a defeat of home run proportions. Pre-market, Tesla fell over 5%, and SpaceX dropped more than 4%, rendering the billionaire's political insurance null and void.
He humorously commented on social media: "My laser communication interference in the election might not have worked this time." The money was spent, but the splash wasn’t much.
Previously, everyone believed that the Democratic Party taking power was clearly negative for technology, so why did it instead surge?
01
In fact, the morning plunge was more due to being frightened by "unexpected outcomes".
Although everyone had anticipated a 99% probability of the Democratic Party securing both houses before the election, the magnitude of the Senate flip and the loss of deeply red states exceeded the predictions of most institutions.
Once the expectation difference appeared, the instinct of capital was to run for safety.
At that time, the market was mainly afraid of three things.
First is regulatory tightening. There was fear that the Democratic Party would quickly push for strong regulations on AI, tighten data center approvals, and ramp up tech antitrust measures, directly striking at the core of capital expenditures in the AI market.
Just before this, AI infrastructure had been adjusting, with the market constantly debating "whether this amount of investment will yield returns," and once the negative news hit, it naturally became a major area for selling.
Second is the fiscal shift. There was concern that the Democratic Congress would block all of Trump’s tax cuts and deficit expansion, leading to an unexpected tightening of fiscal policy that could drag down the economy and corporate profits. The broad market followed suit and fell; the core reason lies here.
Third is the uncertainty of local policies. In places like Texas and Ohio, where computing power is concentrated, if they turn blue together, no one can accurately predict whether localized restrictive policies might be rolled out. This type of scattered regulation across states is harder to predict than federal legislation and also more difficult to hedge against.
However, the panic didn't last long. Once the election results were in, the market quickly reacted: the impact of the election on AI was felt at the valuation and sentiment level, not at the cash flow and industry trend level.
Funds returned to buying; apart from the negative news settling, there were two key logics.
First, although the Democratic Party secured both houses, they could not attain the two-thirds majority required to override a veto, so even if they wanted to implement restrictions on the AI industry, it wouldn't be that easy to pass.
Second, Trump publicly stated that he maintains full veto power, and if necessary, he can exercise his presidential veto rights to force the Democrats to reach a bipartisan agreement with him.
As long as Trump doesn't sign, even the most severe AI regulatory bills will not become law.
Here, the veto power is not a positive for AI, but it has pushed a scenario that panic had assigned a high probability back to nearly zero.
Delving deeper, Wall Street is not afraid of decentralization at all; what they fear is the Democratic Party going rogue after gaining dominance.
Under a decentralized structure, not only is the Democratic Party's AI regulatory bill hard to enact, but Trump's own tax cuts and fiscal expansion agenda will also face obstruction.
The legislative agenda from both sides will essentially deadlock, resulting in little change in the current policy framework. Corporate tax rates will remain unchanged, tariff frameworks will remain unchanged, and the current regulatory agenda will remain unchanged.
For high-valuation tech assets, this state of "nothing changes" itself provides implicit support—at least there will be no additional risk premiums to pay for "sudden tax increases" or "unexpected new regulations."
02
In fact, the Democratic Party has never been the “AI opposition party,” strategically not opposed to AI.
The two parties can argue, but on the matter that “AI is at the core of America's technological hegemony,” their positions are highly aligned.
The previous chip bill and national AI R&D strategy were both pushed during the tenure of the Democratic Party.
More practically, many establishment figures within the Democratic Party have significant investments in tech stocks.
The most typical example is the Pelosi family, whose total estimated value in U.S. stocks is around 134 million dollars, with over seventy percent in technology and AI-related targets, where Nvidia is the largest holding, accounting for 37.3%, with historical disclosed holdings peaking between 5 million and 25 million dollars. Microsoft, Google, Amazon, and Broadcom are also all on the list.
Not only Pelosi, but also New Jersey Congressman Josh Gottheimer, who is also the co-chair of the Democratic Party's AI and Innovation Economy Committee, is leading the formulation of the party's AI legislative agenda, with family holdings ranging from 8.5 million to 38 million dollars, where Microsoft alone accounts for about 69%, and also holds Nvidia, TSMC, Applied Materials, and other upstream and downstream targets.
In Silicon Valley, representatives like Ro Khanna, Senator Cory Booker, and Adam Schiff also hold large amounts of leading tech stocks or ETFs related to semiconductors and Nasdaq themes.
The NANC ETF, which tracks the trading of Democratic members, shows that the weight of the information technology sector is close to 45%, with the top three holdings being Nvidia, Microsoft, and Google.
What these people want is simply regulation, competing for AI leadership under the framework of "safety rails," requiring giants to pay more taxes, assume more responsibilities, and regulate industry order, rather than killing the industry.
If a bill causing significant damage to AI is indeed put forward, not to mention that it wouldn't pass Trump’s scrutiny, it wouldn't even get through the Democratic Party internally.
Thus, even if the Democratic Party secures both houses, over the next two years, it is highly unlikely that any stringent laws from Washington will emerge that could severely damage the global computing power expansion; instead, it's more likely to follow a narrow path of model safety testing, and restrictions on specific high-risk applications.
The feasible legislation will be nothing more than soft requirements like information disclosure, voluntary compliance, and safety standards.
The recent collective recovery in AI stocks essentially reflects this converging expectation difference.
In fact, the policy risks brought about by the midterm elections can ultimately be seen as short-term emotional disturbances.
The true determinants of AI’s mid-term trend are still the industry itself—under high interest rate environments, the rising cost of financing, and price competition leading to a decrease in capital expenditure return rates for AI, these are the core issues.
In the long run, they are also short-term impacts; the long-term narrative space for AI is far from reaching its ceiling.
03
The most concerning issue for domestic investors is how the outcome of this election affects the AI sector domestically?
We know that currently, many of the domestic AI hardware giants have major clients who are large foreign companies, so their stock prices will definitely continue to move with overseas sentiment in the short term.
But in the medium to long term, the self-controllable line has become more certain.
Many people worry that a Democratic victory will lead to stronger restrictions on AI related to China; the direction is correct, but it’s important to understand that there is bipartisan consensus on technological competition with China, with the only difference being the strategy.
The Republican Party prefers unilateral sanctions and quick solutions; the Democratic Party is more inclined to set rules with allies and create a systematic encirclement.
However, their goals are completely aligned, aiming to maintain the superior gap in high-end computing power.
Therefore, once the Democratic Party completes its transition, we may see stricter export reviews on high-end AI chips, high-speed interconnection chips, and EDA tools, while transshipment trade and remote access to cloud computing resources may gradually be tightened.
However, these restrictions will have clearer boundaries; while high-end might continue to be stuck, the mid- to low-end will continue to be opened up, and a complete decoupling won’t occur.
After all, U.S. tech companies also rely on revenue from the Chinese market to support their R&D, and a thorough clean-up would backfire on themselves.
Currently, China's full set of capabilities in smart computing center construction, server manufacturing, optical module capacity, and industry large-model implementation are highly competitive in the global market. From "East Data, West Calculation” to various local AI industry policies, and to the intelligent transformation of finance, industry, and government, the long-term logic of domestic computing power construction is very stable.
The pace of construction for domestic smart computing centers and industry computing clusters is determined by domestic industrial policies and digital demand, and is largely unrelated to the U.S. midterm elections.
Among them, domestic AI servers, domestic computing power chips, domestic storage, along with supporting power supply and cooling, and optical module companies, will benefit from the trend of self-controllability, showing the highest order certainty.
They are considered the “counter-cyclical assets” in the AI sector, where the corrections resulting from external volatility often represent windows for long-term commitments.
As for the application layer of AI, it is even less affected by the election.
In fields like large industry models, AI+ Industry/ Healthcare/ Autonomous Driving, the demand, data, and scenarios are domestic, with the core contradiction being the ability to commercialize effectively.
How their markets perform depends primarily on technological iterations, whether clients are willing to pay, and if there are sufficient solid case studies, and won't change direction because of one election.
04 Conclusion
Looking back, this midterm election that stirred the globe seems more like a large-scale “expectation correction.”
It knocked down the most extreme regulatory risks that everyone had imagined, allowing the market to return to rationality from panic; but it didn’t bring any new incremental positives, so don’t expect it to directly initiate another round of frenzied growth.
When this wave of excitement fades, the market will ultimately return to fundamentals.
In the first half, the AI market was all about expectations, imaginations, and who could expand faster.
In the second half, the AI market will have to return to implementation, profitability, and real demand.
This is especially true for domestic industries.
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