Midterm Shifts Rattle Tech, Boost Health Stocks

Democratic candidates won control of Congress in Tuesday's midterm elections, sending shockwaves through the stock market that reshaped investor portfolios overnight. The shift in legislative power immediately altered expectations for federal spending, energy policy, and corporate regulation. This change forced traders to rethink which sectors would benefit from the new congressional leadership and which would face increased scrutiny or reduced demand.

Artificial intelligence stocks led the decline. Fears that a Democratic Congress would slow the construction of new data centers, particularly in Texas, weighed heavily on the sector. Nvidia and Lam Research experienced volatile trading as investors priced in potential regulatory hurdles. Amazon, which funds much of the infrastructure buildout, fared better than its peers. The concern centers on the cost of power and cooling for these massive facilities, areas where new legislation could impose stricter rules.

Defense and energy stocks also dropped. Investors bet that Democrats would push to end the war with Iran, a conflict that has restricted global oil supplies since February. An end to the war would lower crude prices, reducing profits for refiners and explorers. Northrop Grumman, Lockheed Martin, RTX, and General Dynamics shares fell between 4% and 12% in the days following the election. Exxon Mobil and Phillips 66 saw similar losses, though both companies still show positive gains for the year.

Healthcare and homebuilding sectors moved in the opposite direction. Hospital stocks rose on hopes that Democrats would restore funding for Medicaid and renew subsidies for the Affordable Care Act. HCA Healthcare climbed 6.9%, Tenet Healthcare gained 6.2%, and Universal Health Services jumped 10.4%. In the housing sector, D.R. Horton gained 4.9% and PulteGroup rose 4.4%. Investors anticipate that policy changes addressing affordability and tariff relief could support these companies, although high mortgage rates remain a hurdle due to expected Federal Reserve interest rate hikes.

Elon Musk’s businesses took a hit as well. Shares of Tesla fell 10.1% and SpaceX, which holds his xAI unit, dropped 5%. Traders worried that a new Congress would investigate Musk’s role in cost-cutting initiatives during 2025. Trump Media & Technology suffered a steeper loss, shedding 33% of its market value in three days. The president's stake in the company dropped from nearly $5 billion in March 2025 to less than $600 million. The company is currently negotiating a merger with nuclear fusion firm TAE Technologies.

Consumer staples and alcohol producers gained as investors sought safer havens. Constellation Brands and Brown-Forman rose on expectations that Democrats would end the global tariff conflict that has raised prices. Costco Wholesale added 3.4%, Procter & Gamble rose 2.1%, and Dollar General increased by 2.5%. These gains reflect a broader move away from riskier tech stocks toward companies that benefit from lower input costs and stable consumer demand.

Renewable energy companies, excluding those tied to data centers, also posted gains. Investors expect a more supportive environment for wind and solar projects under the new Congress. This optimism contrasts with the mixed performance of power companies that service the AI sector, where skepticism about data center growth persists. The market continues to adjust as Democrats prepare to take office in January, with pending legislation on energy and healthcare set to test these early trends.