AI Labs, Oil Majors and Big Pharma Brace for Democratic Probes

Democrats appear on track to take control of at least one chamber of Congress in next month's midterm elections, and law and lobbying firms in Washington are telling companies to prepare for a wave of subpoenas, hearings and investigations that historically knock shares lower.

BakerHostetler, one of those firms, issued a blunt warning to clients in a recent notice on its website: "With a change in control of Congress, congressional committees will have new leadership, ramp up their investigations and conduct aggressive oversight on every industry."

The firm advised companies not to wait. "Clients and potential clients who believe they may be pulled into an investigation should act now and contact their attorneys to begin laying the groundwork for a coordinated response and identify potential defensive strategies and opportunities to advance their narrative," BakerHostetler said.

The advice reflects a pattern of modern midterm politics: the party holding the White House usually loses some congressional control. Here are the companies most exposed if Democrats take the gavels.

AI labs in the crosshairs

Evercore ISI analysts, led by Sarah Bianchi, identify artificial intelligence and affordability concerns as likely drivers of Democratic investigations. AI labs such as Anthropic, OpenAI and Google Gemini could face trouble if probes reveal "additional information about hacking, models breaking containment, or internal emails acknowledging AI safety challenges," the analysts wrote in a recent note.

Oil executives face a separate risk. If the Iran war drags on and gasoline and diesel prices stay elevated, Democrats could turn the spotlight on energy companies and reignite debates over a windfall-profits tax or measures to force prices lower, the Evercore team said.

Big Pharma and the detention business

"Once armed with committee gavels and subpoena power, Democrats are likely to target Big Pharma for scrutiny," Andrew Lokay, a senior research analyst at Beacon Policy Advisors, said in a recent note.

The trigger is transparency. Seventeen large pharmaceutical companies struck drug-pricing deals with the Trump administration, and Democratic lawmakers have argued that more details about those deals need to be released.

Lokay also expects a Democratic-run House or Senate to target companies holding Department of Homeland Security contracts or facilitating the detention or deportation of immigrants, as the opposition party works to challenge President Donald Trump's immigration policies. The examples he cites are private-prison operators GEO Group and CoreCivic — both of which saw their stocks surge when Trump won the 2024 White House race.

Equity stakes and ballroom donors

Companies that granted equity stakes to the Trump administration — Intel, MP Materials and USA Rare Earth — along with businesses connected to Trump family enterprises are likely investigation targets, the Evercore analysts said.

Donors to Trump's controversial White House ballroom project face similar exposure. Amazon, Apple and Meta are among the corporate contributors to that project.

Rep. Robert Garcia of California, the Democrat expected to chair the House Oversight Committee if his party wins the chamber, has already been criticizing the ballroom donors. A year ago, Garcia co-sponsored a bill called the Stop Ballroom Bribery Act.

Do the selloffs last?

History offers a playbook for investors. Stocks of targeted companies typically drop when a congressional probe is announced, then rally on the day of the actual Capitol Hill hearing, the Evercore analysts found.

"This happens because the stocks fall on the initial announcement of an investigation and rise once investors realize that Congress is not unified or there is no imminent credible government action," they wrote.

The pattern has exceptions. Hearings "tend to be risky events when direct earnings-related information comes out or there is evidence of unity and possible government action," the Evercore team said. For companies in the blast radius, the real test will be whether a divided Congress stays divided once the subpoenas start flying.