Markets had a violent week, and published research is fairly united on why: the US midterms reshaped the AI trade overnight.
Democrats swept Congress and flipped key governorships, and analysts argue voter hostility to new data centers is now a genuine policy risk. One estimate puts roughly 45% of planned US data center capacity in states likely to tighten rules. Thursday delivered the S&P's worst day since April 2025, down 4.4%, with the Nasdaq entering correction. Commentators attribute the violence less to fundamentals than to mechanics — hedge fund gross leverage near five-year highs, margin calls, and leveraged ETF unwinds. Strain is visible in AI funding too, with one widely watched private AI name reportedly repriced from around $2T to $1.2T.
Not all the takes are bearish. A separate thread argues divided government reduces policy uncertainty and historically supports equities. On macro, a 165k payrolls beat with unemployment ticking to 4.1% kept a December Fed hike in play. Oil fell roughly 12% on US–Iran deal hopes, though researchers flag re-escalation risk.