Today is Election Day for the midterms. Could the outcome shake AI stocks hard again? I'd like to know what happens to my Nasdaq ETF.
2026-11-03
There are three possible outcomes, and AI stocks get hurt badly in only one of them
The report cites JPMorgan's estimates. A Democratic sweep of both chambers is 66%, and a divided Congress with only the House under Democratic control is 26%. The remaining 8% is the case where Republicans hold the current configuration. What splits AI stocks in the market is not these odds but which regulations actually emerge in the event of a sweep.
Paths by scenario
| Scenario | Probability | Path to Nasdaq ETFs | When volatility is highest |
|---|---|---|---|
| Democratic sweep of both chambers | 66% | Hearings and investigations come first, and legislation may be blocked by a veto | The first few days after the result is confirmed |
| Divided Congress | 26% | Legislative gridlock reduces regulatory uncertainty | Relief right after confirmation |
| Status quo holds | about 8% | Smallest regulatory burden | Almost none |
A sweep does not automatically mean regulatory legislation
Saying AI stocks will necessarily fall in a sweep is an exaggeration. Evercore ISI noted that the broadest market risk comes less from legislation than from investigations and hearings targeting Big Tech and AI (as reported by Reuters, 2026-10-30). On the other hand, many see little chance of an actual bill passing given President Trump's veto. As the report's item on AI-generated political ads shows, there is still no federal regulation, and four related bills did not make it out of committee. What the market fears is not the law but the headlines.
Some of it is already priced in
Citadel Securities' Scott Rubner said on October 20 that clients were ready to move money back into AI stocks once political uncertainty clears. He also pointed out that a Democratic sweep could be a regulatory burden for chip stocks. The same report said the Nasdaq 100 fell 5.5%, wiping out roughly $1 trillion in chip-stock market cap. That the VXN is 31.01 today, well above the VIX (21.38), also means election anxiety is concentrated on the Nasdaq side. Once the result is out, the removal of the uncertainty premium works in your favor.
History is a weak guide
Fidelity data show that 12-month S&P 500 returns after midterm elections since 1938 were positive 95% of the time. But that is for the whole index, not tech stocks alone. PNC also warns that midterm history is an unreliable guide. With the Nasdaq already down 4.37% over five sessions, it is hard to apply the historical average as is.
What investors should do
- Avoid piling into buys or sells right after tonight's results. The first reaction usually exaggerates the size of the headline.
- Even if a sweep is confirmed, don't cut your Nasdaq ETF position immediately. Watch for several days to see whether the targeted companies and the regulatory language become concrete.
- If you plan to buy, don't put it all in at once. Spreading purchases out until after the November 6 jobs report helps you sidestep both the election and the rate event.
- Remember that ETFs with heavy weights in individual Big Tech names are more sensitive to regulatory headlines, even among Nasdaq ETFs.
The probabilities are JPMorgan's estimates, and no after-the-fact result confirmed by search is available yet.
Sources: Kitco/Reuters Wall St Week Ahead (2026-10-30), Advisor Perspectives (2026-09-24), PNC Insights.