After Democrats take both chambers, who will be the next "victim" after Nvidia?
Original | Odaily (@OdailyChina)
Author | Wenser (@wenser 2010 )
Nvidia's market cap evaporated by $500 billion in five days, and this is clearly not the last "victim" after the Democrats won a congressional majority.
In early November, the results of the U.S. midterm elections were released. As expected, the Republicans lost control of both chambers, and the Democrats won a landslide victory to secure a majority in Congress.
After the election results were announced, apart from a brief small rebound, sectors such as tech stocks, AI stocks, and energy stocks fell again. Combined with factors including U.S. stock earnings season, Anthropic's upcoming IPO, and the extramarital affair scandal involving Nvidia founder Jensen Huang, markets including U.S. stocks, gold, crypto assets, and oil were unable to remain unscathed, with a general cloud of decline hanging over them.
This is only the beginning. The transmission of political shifts to capital markets and crypto markets is still spreading. Within the foreseeable scope, more assets will face bearish shocks in the future. Odaily will attempt in this article to deduce the sectors and targets potentially facing bearish pressure after the Democrats take control of Congress, for readers' reference (Note: The following content does not constitute investment advice).
After the Democrats Become the Majority Party in Both Chambers of Congress: How Will It Affect Capital Markets?
First, it should be noted that the new Congress, with the Democrats as the majority party, has not yet formally taken office. There are still about 50 days until its official inauguration on January 3, 2027. At present, the White House is still dominated by President Trump, whose second term ends on January 20, 2029.
However, unlike the previous situation where Republicans held the dominant majority position, after the Democrats become the majority party, the center of power in legislation, appointments, investigations, and regulation will gradually shift to the latter. Trump will only retain powers such as the presidential veto, military authority, diplomatic authority, and pardon power.
In addition, the Democrats had previously emphasized that they would launch investigations into the Trump family's crypto projects and others. Hearings and subpoenas are also powerful tools for the Democrats, and this is one of the main challenges Jensen Huang has recently faced. Having understood the Democrats' "tools," we can roughly infer the main sectors and specific targets that will be affected subsequently.
AI Data Centers and Cloud Providers: Direct Impact
According to information such as previous midterm election polls and voting results, Americans are extremely dissatisfied with the current situation in which AI data centers and cloud providers affect employment and daily life, and this is also one of the important directions through which the Democrats courted votes this time.
Goldman Sachs previously estimated that after the Democrats take power, states that may tighten data center construction rules account for about 45% of planned U.S. capacity, with Texas alone accounting for about one quarter. Affected by this, Nvidia (NVDA), Broadcom (AVGO), and all companies that have written growth into new data center construction for 2027 and 2028, such as CoreWeave, Nebius, as well as crypto miner-turned companies including IREN, Cipher Mining (CIFR), MARA Holdings (MARA), Galaxy Digital (GLXY), and Riot Platforms (RIOT), will face a series of problems such as project delays and rising costs.
Where there is loss, there is gain. Rich Privorotsky, head of European equity trading at Goldman Sachs, believes that if future computing power expansion is restricted, the value of existing computing power that has already been built and put into operation will rise accordingly. In theory, this is good for hyperscale cloud providers such as Meta (META), Amazon (AMZN), Alphabet (GOOGL), and Microsoft (MSFT) that have already deployed large amounts of computing power; but they may also be subject to restrictions such as strict regulation and investigations.
Of course, considering the impact on the upstream and downstream of the industrial chain, the bearish effects on AI data centers and cloud providers will also further transmit to targets such as chip, memory, cooling, and power equipment manufacturers as well as energy service providers. Companies such as AMD, SMCI (Supermicro), MRVL (Marvell), NVDA (Nvidia), MU (Micron), SNDK (SanDisk), SKHY (SK Hynix), INTC (Intel), and CBRS (Cerebras) are also within the scope of impact.
Energy-Related Targets: Continued Pressure
Apart from the reduction in demand for electricity and other energy caused by data centers and cloud providers, after the Democrats control both the Senate and the House, they may influence Trump's decisions on foreign wars through legislation, fiscal policy, and other means, greatly easing the U.S.-Iran conflict situation.
Affected by this, oil-related commodities (such as CL, BRENTOIL, WIT) have all declined to varying degrees, and oil stocks such as ExxonMobil, Chevron, Shell, ConocoPhillips, and Occidental Petroleum may continue to face pressure.
In addition, one of the long-standing points of contention between Republicans and Democrats—clean energy subsidies and related bills—may also face a moment of retreat, and new energy vehicle companies such as Tesla (TSLA) may also be caught in the crossfire. Last week, Trump expressed support for the Energy Project Approval Reform Act, but faced opposition from some Democratic lawmakers and environmental groups.
Crypto Concept Stocks: Legislative Progress Extremely Difficult
It is foreseeable that, as a non-crypto-friendly party, the Democrats' gain of power in both chambers of Congress will inevitably mean that crypto concept stocks will face severe tests and stricter regulation, and the previously highly anticipated CLARITY Act is also very likely to face a standstill or even possibly be confirmed as unable to pass.
Affected by this, crypto concept stocks such as Coinbase (COIN), Strategy (MSTR), Circle (CRCL), and Robinhood (HOOD) will face a series of major bearish factors. In addition to tighter investigations and legislation, major crypto companies may also face the "stick of hearings" from Democratic figures.
In addition, crypto mining companies including Hut8 and Bitdeer, as well as DAT treasury companies such as ALT5 Sigma (ALTS), a treasury company for the Trump family crypto project WLFI, may also face a wave of concentrated liquidation and elimination. Trump Media Group (DJT), which is deeply associated with Trump, is also within the "firing range" of Democratic investigators.
Furthermore, for prediction market platforms aspiring to IPO, such as Kalshi with a valuation of tens of billions of dollars, the Democrats, who pursue a high-pressure regulatory policy toward crypto, will certainly not sit idly by and watch it grow safely, and its long-standing regulatory disputes and legal rulings with various U.S. states may also face certain pressure.
Of course, the Democrats' rise to power is not entirely bad. It also has certain positive stimulus effects on tariff control, curbing prices, and boosting consumption, and related targets are expected to usher in a new round of gains. For example:
- Consumer stocks: Walmart (WMT), Costco (COST), Procter & Gamble (PG), Coca-Cola (KO);
- Healthcare stocks: Merck (MRK), Eli Lilly (LLY), Johnson & Johnson (JNJ), UnitedHealth (UNH);
- Defense and security stocks: Palantir (PLTR) and others.
