① As the United States officially enters midterm election week, many industry insiders note that certain AI‑driven regional markets in Asia may face new policy uncertainties stemming from the U.S. midterms.
②The outcome of this election may, to some extent, reshape the trading dynamics of technology stocks and ripple across multiple sectors, from clean energy to defense.
As the United States officially enters midterm election week, many industry insiders note that certain AI‑driven regional markets in Asia may face new policy uncertainties stemming from the U.S. midterms. The outcome of this election could, to some extent, reshape the trading dynamics of technology stocks and ripple across multiple sectors, from clean energy to defense.
Strategists say that if Democrats sweep both the House and Senate, the AI industry and data-center construction are likely to face stricter regulatory scrutiny. By contrast, should Republicans unexpectedly retain control, it would usher in greater policy continuity, potentially benefiting chipmakers in South Korea and Taiwan, as well as other suppliers riding the U.S. tech boom.
At present, both opinion polls and prediction markets indicate that the Republican Party faces an extremely high likelihood of losing control of the House of Representatives, while the risk of losing the Senate should not be underestimated either.
Beyond the tech sector, industry insiders say that Asian clean-energy companies, including those in China, could benefit from a stronger Democratic performance, while Japanese defense‑related firms might fare better if Republicans retain control of Congress. Meanwhile, Swiss private bank Lombard Odier notes that a divided government could provide indirect support to equity markets by curbing fiscal expansion and putting downward pressure on U.S. Treasury yields.
In fact, this U.S. midterm election comes at a sensitive juncture for AI-related deals in Asia—investors are already grappling with concerns about persistently high borrowing costs, the sustainability of the memory‑chip boom, and whether debt‑financed spending on AI infrastructure can deliver adequate returns. As issues such as AI safety, data‑center development, and electricity costs become increasingly politicized in Washington, the midterms add yet another layer of uncertainty.
"If the Democrats score a sweeping victory, these issues could become even more pressing, and such concerns might trigger another round of pullbacks in AI‑related stocks," said Phillip Wool, head of portfolio management at Rayliant Global Advisors. "Any factor that poses a threat to AI would significantly weigh on market sentiment toward the stock markets of South Korea, Japan, and—though perhaps to a lesser extent—China."
Of course, U.S. President Trump currently retains his presidential veto power, as well as broad authority over tariffs, immigration, and foreign policy, which may limit the Democratic Party's ability to alter its agenda in the future. On Sunday, Trump stated that if the Democrats win a majority in Tuesday's midterm elections, he might have to become "Mr. Veto."
The following are the key themes that market participants are closely watching:
AI Policy Test
In this AI investment boom, Asia has more at stake than most regions worldwide, as South Korea and Taiwan supply many of the advanced semiconductors and other critical hardware that underpin the construction of U.S. data centers.
However, if a Democrat-controlled Congress ramps up scrutiny of the sector, such exposure could leave the region vulnerable. Potential areas of concern include requiring AI developers to shoulder a greater share of the costs associated with powering data centers, as well as tighter congressional oversight of trade and technology policies.
Any measures that drive up infrastructure and electricity costs, or make data center construction more challenging, could exacerbate investors' concerns about the substantial capital commitments required for artificial intelligence and the mounting debt burden needed to finance this expansion.
"Potential changes in the U.S. regarding AI infrastructure development, data center expansion, or technological restrictions could ultimately affect Asian supply chains," said Afdhal Rahman, Executive Director of OCBC Bank's Wealth Advisory Division. Currently, some capital has begun shifting from AI-related stocks to sectors such as finance, healthcare, and utilities.
Nevertheless, many investors expect that, regardless of which party controls the U.S. Congress, global demand for artificial intelligence computing power and infrastructure will remain robust.
Pruksa Iamthongthong, Head of Asia-Pacific Equities at Aberdeen Standard Investments, stated that chipmakers in South Korea and Taiwan remain a key component of this structural investment theme, enabling them to navigate various electoral outcomes with confidence.
Trade and Clean Energy
This midterm election could also affect exporters and clean-energy stocks, though some investors believe the outcome remains uncertain.
Rayliant's Wool stated that if the Democratic Party achieves a sweeping victory and strengthens its support for clean energy, it could boost market confidence in Chinese photovoltaic, battery, and electric vehicle companies. Of course, if Democrats take control of Congress, the constraints on the domestic agenda might compel the Trump administration to rely more heavily on executive authority, making trade one of the areas where the White House still retains considerable room for action.
"Tariffs and trade are the most volatile channels," said Wei Li, Head of Multi-Asset Investment at Société Générale Securities (China), who believes that, in a divided-government environment, trade tensions could escalate.
Others, meanwhile, expect the midterm elections to have only a limited impact on China's stock market, as the overall direction of U.S. policy toward China enjoys bipartisan support.
June Chua, Head of Asian Equities at Manulife Investment Management, stated that the diversification of China's export markets and its continuously improving technological capabilities have also helped to mitigate the impact of policy shifts in Washington.
Geopolitics and Oil Price Shocks
For many Asian investors, geopolitics and oil price trends represent another key dimension in assessing this election.
Some market participants, including Kazuyuki Muramatsu, head of investment management at Nagomi Capital, are bracing for the possibility that the historical pattern of a post‑U.S. midterm election stock market rally could be disrupted. Earlier, Trump hinted that U.S. forces might resume military strikes against Iran after the election, heightening the risk of another surge in energy prices.
Muramatsu noted that if oil prices were to climb to $120 per barrel, "it would completely overshadow the market's expectations of a favorable outlook following the midterm elections."
Meanwhile, Li stated that if the Republican Party retains control of Congress and maintains the current fiscal spending priorities, Japan's defense‑industrial firms and U.S.-allied manufacturers could stand to benefit.
Foreign Exchange and Bond Markets
The impact of this U.S. midterm election on Asian markets may extend far beyond the stock market.
Richard Franulovich, head of FX strategy at Westpac, said that if Democrats sweep the elections, the dollar's recent rally could reverse, bolstering signs of a U.S.-Iran compromise and prompting stricter scrutiny of spending on artificial intelligence and data centers.
He stated that fiercely contested elections—those that result in recounts or legal challenges—could also undermine public confidence in the U.S. system.
Carol Kong, a strategist at Commonwealth Bank of Australia, said that Democratic control of Congress could limit room for further fiscal expansion and ease upward pressure on U.S. interest rates, thereby putting "marginal" downward pressure on the dollar. If the Republican defeat exceeds expectations, it could trigger a sharper sell-off in the dollar and make Trump's policymaking more unpredictable, which might bolster the yen's standing as an alternative safe-haven currency.
Li of Société Générale Securities stated that, amid a divided government, lower U.S. Treasury yields and a tightening fiscal outlook could benefit Asian exporters and local-currency bonds.
Edited by melody