Democratic Congress Win Hits AI Stocks — But Trump Holds a Veto

By Daniel Okafor

The Democratic Party's victory in the US midterm elections triggered immediate selling pressure across the technology sector, with semiconductor stocks hit hardest. Swissquote, the bank whose analysts published the note on the S&P 500, asks the question investors now face: is that selloff justified?

The fear is concrete. Markets worry that massive AI infrastructure investment plans could be questioned or delayed by Democratic legislative initiatives, both at federal and local level. Swissquote identifies two concerns driving the selling:

• Federal legislative action against AI in the US Congress.
• Local action targeting AI infrastructure.

Both risks are real. Neither, in the bank's view, is likely to break the sector's investment momentum.

Why the federal blockade risk looks overstated

Start with the mechanism. A Democratic majority in Congress can influence AI-related regulation, Swissquote notes. But Donald Trump retains the single most powerful tool in the process: the presidential veto.

To override a veto, Democrats would need a two-thirds majority in both chambers. That threshold is, in Swissquote's words, "particularly difficult to reach" for a party holding only a simple majority. The president can therefore block any legislation imposing a nationwide moratorium on new data centers or adding legal restrictions on the sector.

There is a second check on Congressional ambition. Swissquote points out that there is no unified Democratic push to undermine AI momentum in the United States. The party does not speak with one voice on the issue. Meanwhile, the Republican minority in Congress — and above all the White House — retain what the analysts call "powerful means of action and obstruction."

Where the real risk sits: city halls, not Washington

The harder risk to neutralize operates below federal level. Local authorities across individual US states hold significant powers over urban planning, zoning and building permits. They can reject specific projects, impose additional requirements or temporarily suspend new developments.

Swissquote flags the pressure points: environmental constraints, water consumption and the substantial electricity requirements of data centers are all potential sources of local opposition. And here the veto is useless. As the analysis puts it, "The US president cannot simply overturn a municipal decision to deny a building permit through a presidential veto."

Congress also has leverage that requires no new legislation at all. Congressional hearings, investigations into major technology companies and budget debates can raise regulatory uncertainty and complicate initiatives by the Trump administration, Swissquote notes.

What does this mean for hyperscaler capex?

For financial markets, the analysts draw a sharp distinction. Investors should separate the risk of a widespread federal blockade — constrained by presidential powers — from the risk of operational delays to infrastructure projects.

Microsoft, Amazon, Alphabet and Meta could keep their massive investment budgets intact while facing growing difficulty obtaining permits, securing electricity connections and accessing the capacity needed for new data centers. The money keeps flowing. The compute arrives later.

That gap is the metric to watch. Swissquote's conclusion: the political shift in the United States "represents an additional risk factor for the deployment timeline of AI infrastructure, but not necessarily for the structural investment momentum in this sector."

The main issue for equity markets, the bank says, will be monitoring the difference between the capex announced by hyperscalers and the actual commissioning of new computing capacity.

In practice, that means the midterm result prices as a scheduling risk, not a demand shock. Semiconductor sellers may have repriced a federal threat that the veto math largely neutralizes — while underpricing the slower, quieter drag of zoning boards and power grids.

Swissnote disclaimer: the analysis is for information purposes only and does not constitute investment, legal or tax advice.