We outline the backdrop to the market's sharp decline after the US midterm elections and 4 points to watch going forward, focusing on data center regulations and AI-related developments. The market reaction, movements in key sectors and the outlook for regulatory impacts are summarized.
After the US midterm elections on 3 November 2026, the Republican defeats in gubernatorial elections came as a surprise, and the results of the gubernatorial races prompted market selling. Concerns spread over the medium to long-term growth prospects for AI, amid views that data center projects could be delayed in Texas and elsewhere.
Tighter regulations related to data centers are expected to affect investment trends in the AI sector. However, this does not mean that AI's growth prospects have been completely rejected overall, and the possibility of improved profitability at some companies, alongside restraints on data center construction, is also being discussed. The SOX Index fell, while indices centered on GAFAM remained relatively firm.
There are 4 points to watch going forward. The first is the strictness of data center regulations led by the Democratic Party, the second is how medium- to long-term investors assess AI's growth prospects and developments among newly listed companies, the third is the underlying trend in the US economy and the economic impact of data center regulations, and the fourth is expectations for December rate hikes in Japan, the US and Europe and the extent to which they are priced into the market.
Other factors currently in focus include the outlook for data center demand in 2027, Nvidia's earnings announcement, trends in US consumer spending and crude oil and gasoline prices, and the easing of downward pressure as a result of stability in the Middle East.