Nasdaq Plunges as Democrats Gain Control of U.S. Congress
The Nasdaq fell over 5% following midterm elections that gave Democrats control of Congress, sparking investor fears over AI regulation and data center taxes.
The Democratic Party gained control of both the House and the Senate in the 2026 midterm elections, triggering a historic swing in U.S. stock markets. The Nasdaq plunged more than 5% on Thursday, marking one of its worst days since the pandemic, as investors reacted to a perceived blue tidal wave and anti-data center sentiment in Washington, D.C.
Market volatility is driven by fears that the new Democratic majority will implement AI moratoriums and data center taxes, particularly affecting buildouts in Texas. This instability has already impacted the projected valuation of Anthropic's upcoming IPO, with some estimates dropping from $2 trillion to between $1 trillion and $1.5 trillion. Prime brokerage data from Goldman Sachs Private Wealth Management showed record hedge fund selling of U.S. tech stocks during the sell-off.
Despite the immediate plunge, some analysts argue the market is overreacting, noting that AI infrastructure is too critical to U.S. GDP growth and the technological competition with China to be severely restricted. Historical data cited by U.S. Bank suggests a positive long-term trend, as the S&P 500 has produced positive returns in every 12-month period following midterm elections since 1950. The 120th Congress is scheduled to convene on January 3, 2027.
