5 financial impacts from the 'bluenami'

The Democrat's success in the US midterm elections saw them take control of both the Senate and the House of Representatives.

It will be the first time that US President Donald Trump, a Republican who also held the White House from 2017 to 2021, has had to contend with a Democratic-controlled Congress in both chambers.

The blue tsunami or 'bluenami' sparked political shockwaves and fears of another AI retreat.

The US economy has been heavily supported by massive corporate investment in data centres.

"The main financial impact is the expectation that there will be a slowdown in AI expansion," said Susannah Streeter, Chief Investment Strategist at Wealth Club.

"And because of that and how it underpins the US economy, it's sending ripples around the world."

The uncertainty around the benefits of AI could impact the appetite for big spending on AI infrastructure build-out across corporate America.

This could also have a knock-on effect on other companies with a slowdown in investment that may affect companies in Ireland and elsewhere that have trade relations with overseas companies and multinationals here.

Ireland in particular is heavily reliant on corporate tax which makes up around a quarter of the country’s total government revenues.

Intel, who employ 4,900 people in Ireland, already saw its shares plunge by around 30% in a single session following its late-October earnings release, wiping out about $140 billion in market value.

This was after the company reported sales $1 billion below market estimates and said it does not expect positive cash flow this year, the latest sign of the far-reaching strains caused by the massive AI buildout.

Intel shares also fell after the elections, down more than 22% in the past week.

So, what else could the midterm results mean for markets and investors, as well as other areas facing potentially stricter regulation and policies?

Stock Markets

Despite the markets reacting relatively positively to the Democrats' electoral victory, by Friday sharp falls had been recorded across the board overnight.

The declines were particularly steep in tech where we saw a big sell-off in AI and semiconductor stocks over the risk some Democrats want to curb the rollout of datacentres.

The S&P 500 and the Nasdaq marked their sharpest one-day falls since April 2025 on Thursday.

And the jitters spilled over to global markets, with Europe's STOXX 600 down 1%.

"The election appears to have provided another trigger for investors to take profits, given that underlying doubts about the sustainability of the AI spending spree were already bubbling away," said Ms Streeter.

There is potential for a period of uncertainty between now and when the Democrats take control of Congress in January, and to what extent they may tighten AI regulation.

"The sharp falls in stock markets over the past couple of days reflect growing concerns about whether the expansion of data centres by cloud service providers could slow in 2027, 2028 and beyond, or even face a more significant setback," said the Chief Economist of Cathay United Bank, Chi-Chao Lin.

"That is what markets have been reacting to."

The markets don’t like uncertainty, but it’s not clear what could bring some reassurance back into them for now.

Ms Streetor noted that investors should focus on diversification, quality companies and defensive sectors which remain important anchors amid the volatility.

Ai and Data Centres

The sell-off in tech stocks reflected fears that data centre expansion could slow in 2027 and beyond, threatening demand for semiconductor equipment.

Democrats are likely to push for greater regulation.

This in turn could potentially slow the AI juggernaut.

If there is a big AI slowdown in the US, which has underpinned growth, that will have big repercussions for the largest economy in the world, as well as having a ripple effect across the globe.

Democrats are planning to unleash a flood of new legislation targeting artificial intelligence systems and data-centre development.

Under the Republican-led Congress, lawmakers were largely focused on promoting AI development and declined to pass legislation restricting aspects of the technology.

For example, President Trump did not introduce any AI restrictions following warnings from OpenAI and Anthropic of the potential existential threats that AI could bring.

US voters turned ‌against the rapid development of data centres and their extensive power needs, blaming them for increasing the cost of energy.

A poll for AP and a consortium of news organisations found 56% of surveyed voters said data centres were a "crucial or major" factor in their vote.

While 76% said they would oppose the construction of a new data centre in their community.

"We're expecting tighter AI regulation and so we're expecting twin tracks of tighter regulation on potentially the operations of large language models, but also on the build out of data centres," commented Ms Streeter.

"I think what triggered the sell off this week was a report that these would be a real top priority for the Democratic leadership from January."

Bonds

By the end of the week, fears that the Democrats victory would increase regulatory scrutiny of AI and slow the data centre build-out, sent investors to the ⁠safety of bonds.

Bonds gained in Asia, with US Treasuries as well as government bonds in Japan and China rising.

The US dollar lured haven flows as did the Japanese yen and Swiss franc.

The yield on the benchmark US 10-year Treasury note was at 4.83%, hovering near the lowest level since September 9.

The 10-year JGB yield dropped as much as 9 basis points to 1.79%, the lowest since 30 June.

"Bonds are increasingly behaving like bonds again, with income re-emerging as the primary driver of returns and restoring their traditional diversification benefits," said Masahiko Loo, chief fixed income strategist at State Street Investment Management.

"This looks more ‌like a reassessment of AI policy risk than a reassessment of the AI cycle."

Chief Investment Officer with Unio Financial Services, Mike O’Sullivan’s view on the global sell-off is that it’s a market reset that could create opportunities for long-term investors.

"In early October, our view was that bond markets had sold off aggressively, and that yields were attractive. As such the rally in bonds has picked up pace and yields are down significantly," he said.

"Materially, any change in the pace of AI infrastructure build, very likely means an end to interest rate hikes from the Federal Reserve in the coming quarters. Then, to a large extent the AI sell-off is the 'last shoe to drop' in the sense that other sectors, such as financials, have been correcting since the summer."

He believes this will help to temper valuations and make stocks (and bonds) more appealing for long-run investors.

Oil

Oil prices were on track for a fall of 16% this week, the steepest decline since the start of the Covid-19 pandemic.

Prices have been decreasing amid hopes that the Iran war might come to end after Democrats won control over US Congress.

On Friday Brent crude was trading at $98 dollars a barrel.

Since the beginning of September prices have generally been above $100.

Oil prices fell 8% on Wednesday alone after the Democrats swept the US midterm elections, settling at two-month lows.

However, prices rebounded on a surge in tanker attacks in the Gulf and the Strait of Hormuz, renewing concerns over supply flows from the region.

The decline in prices by Friday came amid fresh hopes for a diplomatic breakthrough to end the Mideast conflict and increase the flow of oil supplies from the region.

The market is still looking for evidence of a firm deal being signed on Iran which is why we are still seeing fluctuations across the week.

Prices remain elevated compared to pre-war costs when a barrel of Brent crude was trading between $65 and $72 a barrel.

Wars

Voters in deeply Republican states, who flipped seats to help Democrats take the senate, expressed anger over the US-Iran’s role in pushing the cost of living higher.

Energy costs have soared as the wars in Ukraine and Iran have restricted global oil supplies and increased military spending.

Rising fuel prices have raised outgoings for households who are impacted by higher inflation and borrowing costs.

Pentagon data from late October showed the US military has spent more than $47 billion on the war in Iran.

The Chief Economist at Moody’s Analytics, estimated the war has cost the average US household nearly $2,000.

He said around $1,100 of that comes from higher energy and transportation costs, with higher interest rates and a share of military spending making up the rest.

Posting on X in mid-October Mr Zandi said: "Nationwide, that adds up to $265 billion".

With the elections behind him, it’s unclear if President Trump will try to increase military pressure on Iran or intensify negotiations to end the war.

Democrats have vowed to use their resounding midterm victory to rein in the president, setting up two years of possible deadlock in Washington.

Additional reporting by Reuters