Democratic Midterm Wins Reshape Wall Street: AI and Defense Stocks Slide

The value of Elon Musk’s two publicly traded companies dropped sharply following the midterm elections, with Tesla shares falling 10.1% and SpaceX losing 5%. This decline occurred despite Musk spending more than $445 million to support Republican candidates in an effort to maintain their congressional majority. Investors expressed concern that a Democratic-led Congress might initiate investigations into Musk’s role as the White House cost-cutting chief during 2025.

Wall Street experienced a broader shift in sentiment as the Democratic sweep of the midterms created expectations of policy changes. The most pronounced volatility appeared in the artificial intelligence sector, where companies benefiting from the rapid construction of data centers saw their stocks swing wildly. Nvidia and Lam Research led the turbulence, driven by fears that Democratic victories in statehouses, particularly in Texas, could slow the pace of new data center construction. Hyperscalers such as Amazon fared better than the specialized component manufacturers.

Defense and energy sectors also saw declines as markets priced in the potential end of the U.S. conflict with Iran. Northrop Grumman, Lockheed Martin, RTX, and General Dynamics shares fell between 4% and 12% after Tuesday’s vote. The conflict has constrained global oil supplies since February, raising crude prices. With Democrats likely to push for a ceasefire, oil exploration and refining companies like Exxon Mobil and Phillips 66 lost ground, though they retained solid year-to-date gains.

Healthcare and renewable energy stocks moved in the opposite direction. Hospital operators anticipated the restoration or expansion of funding for Medicaid and Affordable Care Act subsidies, which had been reduced or allowed to expire under the current administration. HCA Healthcare rose 6.9%, Tenet Healthcare gained 6.2%, and Universal Health Services added 10.4%. Renewable energy companies focused on wind and solar power also benefited, although those specifically tied to data center power needs lagged behind.

Consumer-facing industries gained as investors rotated into safer assets and hoped for tariff relief. Alcohol producers, including Constellation Brands and Brown-Forman, rose on the prospect that Democrats would mitigate the impact of global trade tariffs. Homebuilders such as D.R. Horton and PulteGroup, along with retailer Home Depot, posted gains as affordability concerns became a central policy theme. Household goods makers like Costco, Procter & Gamble, and Dollar General also added to their value, reflecting a broader move away from high-risk sectors toward stable consumer staples.

The election results also impacted the media sector. Trump Media & Technology lost 33% of its market value in the three days following the election. The company is currently seeking to improve its financial position by merging with nuclear fusion firm TAE Technologies, a deal that remains pending.