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Hey Tigers 🐯!

AI investors have a new variable to weigh after the U.S. midterm elections: how a change in Congress could affect regulation, spending and the pace of the data-center buildout.

Reuters reported on November 4 that Democrats had captured majorities in both chambers of Congress. In the Asian-session market snapshot it described, $NASDAQ(.IXIC)$ fell more than 2% before paring losses to about 0.8%.[4]

That reaction followed an encouraging earnings signal from $Advanced Micro Devices(AMD)$ , whose shares rose about 8% in extended trading on November 3. $Apple(AAPL)$ had fallen 1.9% during the regular session as investors weighed its outlook for margins and services growth. ([2], [3])

The question is whether strong earnings can support the AI trade while investors reassess the policy risks attached to future growth.

1️⃣ What Institutions See in the Election Reaction

TD Securities strategist Prashant Newnaha, quoted by Reuters, pointed to the prospect of greater scrutiny of technology and AI companies, together with political gridlock. Saxo chief investment strategist Charu Chanana linked the weakness in technology futures to regulatory concerns at a time when investors were already questioning valuations and AI spending.[4]

Their comments identify why the election matters to this trade. Much of the investment case depends on future data centers being built, equipped and put into service. Changes that affect project approvals, funding or operating requirements could alter the timing and economics of that expansion.

A change in congressional control can affect expectations for legislation, budgets and oversight. The business consequences still depend on specific proposals, decisions and implementation. The market reaction described by Reuters reflects uncertainty over that process; it does not establish a particular loss of revenue or profit.

An earlier institutional framework offers a useful counterpoint. In a July 22 pre-election analysis, Morgan Stanley's Head of U.S. Public Policy Research, Ariana Salvatore, argued that the executive branch would retain primary influence over tariffs, foreign policy, regulation and immigration. Her team expected the midterms to have a limited impact on the broader policy backdrop. Applied to the AI trade, that framework suggests distinguishing new congressional scrutiny from an actual reversal of policies or investment incentives.[5]

Fidelity's October 26 pre-election review adds a different perspective on gridlock. It argues that divided government can reduce the likelihood of sweeping policy changes, making the environment easier for businesses to assess. Denise Chisholm, Fidelity's director of quantitative market strategy, emphasizes earnings growth, capital spending and economic conditions. In her reading, markets have tended to respond to policy becoming "less unclear," rather than simply to one party winning.[6]

The historical record helps separate election anxiety from the subsequent investment horizon. Fidelity reports that, since 1938, the S&P 500 posted price gains in the 12 months following midterms about 95% of the time. Its review also notes that midterm-year market returns ranged from a decline of 27% to gains of nearly 40%, showing how much outcomes varied across economic environments.[6]

Those are different windows: the annual midterm-year range is not the same as the election-to-12-month return. Neither tells investors what should happen in the next trading session. The broad-index record also does not establish that AI stocks will recover on the same schedule, or that divided government caused the gains. Morgan Stanley's July review found little evidence of sustained equity outperformance or underperformance in the three to six months after midterms and highlighted the greater influence of Federal Reserve policy on rates.[5]

For this cycle, the useful historical lesson is to watch whether uncertainty starts to clear while earnings and investment plans remain intact. If scrutiny produces hearings but no material change to project economics, the initial repricing could be driven mainly by the premium investors demand for uncertainty. If legislation or implementation begins to change costs, approvals or customer spending, that would be a different earnings signal. This is the transmission test for the AI trade, rather than a forecast drawn from the election calendar alone.

For investors, the task is to track which concerns turn into concrete changes that affect the companies they follow.

2️⃣ Why Falling Treasury Yields May Not Rescue AI Stocks

The same Reuters snapshot showed the 10-year Treasury yield falling 6 basis points to 4.906%, as investors sought safety in bonds.[4]

Lower Treasury yields can help growth-stock valuations by reducing the risk-free component of discount rates. But stock prices also depend on expected earnings and the additional return investors demand for taking equity risk.

If policy uncertainty leads investors to expect delays in data-center construction or slower spending, they may reduce future earnings estimates. They may also require a larger equity risk premium even before analysts change their forecasts.

Those effects can offset the valuation benefit of lower Treasury yields. The useful question is what is happening to earnings expectations and the price investors are willing to pay for them.

3️⃣ $Advanced Micro Devices(AMD)$ Provides Evidence That Demand Is Still Strong

The latest company results give investors a substantial earnings counterpoint to the policy concerns.

Data-center revenue reached $8.55 billion, up 97% year over year, according to Reuters. The segment includes EPYC server CPUs and Instinct AI GPUs, so the growth rate covers the combined data-center business. ([1], [2])

Total revenue grew 45%, while non-GAAP diluted EPS increased 74%. That shows earnings growing faster than sales as the business scales.[1]

Gabelli Funds portfolio manager Hendi Susanto, quoted by Reuters, highlighted the company's exposure to the AI data-center buildout and interpreted its market reaction as confidence in its competitive position.[2]

There is an important condition to that optimism. The fourth-quarter revenue midpoint implies about 27% sequential growth, but non-GAAP gross margin is expected to be approximately 55%, versus 56% in Q3.[1]

For AMD, investors need to follow both delivery and profitability: whether newer systems ramp successfully, customers deploy them, and revenue growth continues to translate into earnings. The latest results support the demand case. They do not settle how future policy changes might affect the expansion that follows.

4️⃣ $Apple(AAPL)$ Shows Why Earnings Quality Still Matters

Apple offers a useful comparison because its reported results exceeded expectations while the stock faced pressure.

MarketWatch reported fiscal fourth-quarter revenue of $114.5 billion and EPS of $2.10, both above consensus. Yet management's next-quarter gross-margin forecast of 45%–46% was below the approximately 47% expected by analysts. Services revenue growth was projected at 8%–9%, compared with expectations of about 12%.[3]

Goldman Sachs analyst Michael Ng and his team came away with greater confidence in the iPhone refresh cycle, while highlighting slower services growth. Evercore ISI's Amit Daryanani and team focused on memory-cost pressure and evidence of Siri monetization. Morgan Stanley's Erik Woodring and team saw potential services tailwinds but warned that the slowdown could extend into the March quarter. These views were reported by MarketWatch.[3]

The comparison helps frame the broader market question. A company can deliver an earnings beat and still face concerns about the profitability of its next phase of growth. Political uncertainty adds another assumption to an investment case that already depends on costs, execution and business mix.

5️⃣ How to Judge the Next Move

Three checks can help distinguish an initial market reaction from a change in the underlying investment case.

If stocks weaken while earnings forecasts remain intact, valuation and the compensation investors demand for risk may be driving the move. That still requires a judgment about whether the uncertainty is temporary and whether the price offers enough room for it.

If project delays or policy changes begin to reduce revenue and profit forecasts, the investment case needs a more substantial reassessment.

For AMD, the immediate evidence is strong data-center demand and an ambitious production ramp. For Apple, margin visibility and services growth remain central. Across the AI trade, the next step is to connect political developments to measurable changes in company guidance, project schedules and earnings expectations.

🎁💬 Your Turn

If AI stocks remain under pressure after the election, would you wait for analysts to cut earnings forecasts before changing your view, or would greater policy uncertainty alone justify a lower valuation?

Which signal would matter most to you: project approvals, company guidance or profit margins?

📚 Sources

1. AMD — Third Quarter 2026 Financial Results, November 3

2. Reuters — AMD forecast eases AI spending fears as data-center sales surge, November 3 U.S. date

3. MarketWatch — What analysts are telling us while Apple's stock falls after earnings report, November 3

4. Reuters — Stocks wilt, dollar slides as blue sweep jolts AI bets, November 4

5. Morgan Stanley — Midterm Elections: More Noise Than Change?, July 22, 2026; pre-election background

6. Fidelity — The surprising truth about midterms and stocks, October 26, 2026; pre-election and historical background