Wall Street Futures Plunged After Democrats Swept Congress. Then Investors Started Buying Again.

U.S. stock futures recovered Wednesday morning after falling sharply overnight as Democrats won control of both chambers of Congress, raising concerns among investors about tougher regulation of artificial intelligence and the future of the technology industry's massive data-center investments.

Nasdaq-100 futures fell as much as 2.4% as the election results came in, while S&P 500 futures dropped 1.4%, Reuters reported.

The losses did not last long. By 3:13 a.m. ET, Dow futures had climbed 237 points, or 0.46%. S&P 500 futures were up 0.15%, while Nasdaq-100 futures gained 0.26%.

Democrats secured majorities in the House and Senate after defeating Republicans in several longtime GOP strongholds, including Texas and South Carolina. The result leaves President Donald Trump facing an opposition-controlled Congress for the remaining two years of his term.

Technology companies were among those facing selling pressure. Shares of Amazon, Alphabet, Microsoft and Meta traded lower on Germany's Tradegate platform as investors considered what a Democratic Congress could mean for the AI industry.

"The significance of these midterm elections is more like a referendum on AI than a referendum on Trump," Aidan Yao, senior investment strategist for Asia at Amundi Investment Institute, told Reuters.

The four technology giants have been spending billions of dollars developing AI services and building the data centers needed to run them. Their investments have also helped fuel demand for electricity, raising concerns about rising energy bills and the strain on local infrastructure.

Texas and Georgia, where Democrats made electoral gains, are among the states attracting major data-center projects. Investors are concerned that greater congressional scrutiny could slow the industry's expansion.

The AI trade was already under pressure before Tuesday's election. The Nasdaq-100 entered correction territory Monday as investors questioned whether technology companies could generate sufficient returns on their growing AI investments.

The Democratic victory also raised questions about future restrictions on cryptocurrencies, corporate taxes and financial regulation.

"Tighter regulatory scrutiny of technology and AI companies along with the higher likelihood of political gridlock beckon with a Democrat sweep," Prashant Newnaha, senior rates strategist at TD Securities in Singapore, told Reuters.

The dollar weakened following the results, while U.S. Treasury bonds gained as investors sought safer assets. Democrats will have greater power to investigate companies and question administration policies, although Trump can still veto legislation passed by Congress.

Oil prices also swung Wednesday as traders assessed whether the Republican defeat would affect Trump's handling of the war with Iran.

Brent crude rose 0.7% to $104.36 a barrel at 7:30 a.m. GMT, while U.S. West Texas Intermediate crude gained 0.7% to $96.72, reversing losses from earlier in the session, according to Reuters.

Oil markets have remained volatile since the U.S.-Israeli war with Iran disrupted shipments through the Strait of Hormuz. Traders are watching negotiations involving Washington and Tehran, along with any indication that military operations could escalate.

President Trump said Tuesday that the U.S. had no immediate plans for further strikes against Iran, although American officials confirmed limited strikes on Iran's Qeshm Island.

Oil also received support from an unexpected decline in U.S. crude inventories. Figures from the American Petroleum Institute, cited by market sources, showed stockpiles fell by 5.27 million barrels in the week ending Oct. 30. Analysts had expected an increase of about 880,000 barrels.

The U.S. Energy Information Administration is scheduled to release its official weekly inventory report Wednesday at 10:30 a.m. ET.