The Dow's 3% post-election rally reversed by Thursday as the Nasdaq sank 5% and tech lost $1tn in thirty minutes.
Data-center opposition won big: 40 of 41 ballot measures lost, and Ohio, Georgia and Texas elected governors vowing to slow development.
JPMorgan puts 41 AI-linked names at 49% of the S&P 500, with CoreWeave, Nebius and IREN hit hardest.
Data centre politics turned the AI rally into a rout
The midterm sweep first read as certainty and then as a threat to the AI buildout. Markets rallied on the result, then fell once local opposition to data centres became clear and the states holding the most planned capacity elected governors promising to slow development. Companies selling compute took the damage while the buyers held up. The sweep leaves Democrats arguing over what to do with power, and leaves open how young voters and the transfer of wealth from them to older generations shape the next cycle.
Takeaways
Data centre politics broke the AI trade. Forty of 41 local data centre ballot measures lost, and Ohio, Georgia and Texas, which hold more than 40% of planned capacity, elected Democratic governors who campaigned on slowing development . Galloway says governors, not Congress, pose the threat .
The relief rally lasted three days. The Dow rose 3% the day after the election, its best day since April 2025, while the S&P 500 and Nasdaq each gained 1.5% . By Thursday the Dow had dropped more than 1,000 points and the Nasdaq had sunk 5% into correction territory .
Investors separated compute buyers from sellers. Galloway says investors split the companies buying compute from those selling it, and the sellers were hit hardest . Leveraged neoclouds CoreWeave and Nebius fell sharply as the results came in , and Microsoft and Google later turned down too .
Regulation is what AI needs to grow. Galloway argues regulation is key to a market's growth and that missing guardrails and clarity have constrained AI companies . Elson points to Ohio's Amy Acton, who backed a moratorium unless data centre developers cover 100% of their utility costs, as sensible regulation .
The Democratic sweep was broad and centrist. Elson calls the result a blowout for Democrats and notes Fox News's ratings have fallen 30% over the past year . Galloway says most Democrats elected are centrists, and that there is no longer a GOP, only MAGA .
Young voters and a wealth transfer. Governors Wes Moore and Gavin Newsom are launching programmes aimed at young men . Elson wants tax reform, weighing income tax against capital gains and means-testing Social Security, to address the transfer of wealth from young people to boomers .
Where they split on prosecuting Trump
Elson argues Democrats should prosecute crimes rather than hold back for fear of appearing politically biased .
Galloway asks whether the United States would really put a twice-elected president in prison at 83 or 84 .
Galloway says swing voters want accountability but above all affordability and a way forward for their families .
Galloway asks how someone with no background in money management received $2bn, and what was given in return .
What comes next
October consumer and producer price data land this week , after companies absorbed about 40% of tariff costs and passed 60% to consumers.
Earnings arrive from Constellation Energy, Skydance, CoreWeave, Cisco, Nebius and Cerebras .
Elson expects an era of sensible AI regulation.
Galloway expects above-average S&P 500 returns.
Galloway predicts the electoral college will be abolished if enough states pass the initiative, reshaping campaign spending and strategy .
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