Asia’s AI-heavy stock markets face a new US policy wildcard in the midterm elections, with the outcome potentially reshaping the tech trade and sectors from clean energy to defense.
A Democratic sweep of both chambers of Congress would likely bring greater scrutiny of the AI industry and data-center buildout. An unexpected Republican hold would offer more policy continuity, potentially benefiting Korean and Taiwanese chipmakers and other suppliers to the US technology boom, according to strategists. Currently, polls and prediction markets indicate a high likelihood that Republicans will lose control of the House of Representatives, while the outcome for the Senate is less certain.
Beyond technology, Chinese clean-energy companies could benefit from a stronger Democratic showing, while Japanese defense firms may fare better if Republicans retain control of Congress. A divided government could provide an indirect tailwind for equities by restraining fiscal expansion and putting downward pressure on US bond yields, Lombard Odier noted.
The vote comes at a sensitive time for Asia’s AI trade. Investors are already grappling with elevated borrowing costs, questions over how long the memory-chip boom can last and whether debt-fueled spending on AI infrastructure will generate sufficient returns. The midterms add another uncertainty as issues including AI safety, data-center development and power costs become increasingly politicized in Washington.
“If Dems sweep next week, those issues could become more pressing and those fears could spur another pullback in AI stocks,” said Phillip Wool, head of portfolio management at Rayliant Global Advisors. “Anything that’s a threat to AI is going to weigh heavily on sentiment toward stocks in Korea, Taiwan, Japan, and maybe to a lesser extent, China.”