Dow jumps as traders bet midterm results clear path for AI spending

Stock market futures indicated a sharp rise for the Dow and a modest start for the Nasdaq on Wednesday. The divergence reflects a split in Wall Street sentiment following Tuesday's midterm elections. Democrats secured control of both the House and the Senate, a result that many investors initially viewed as a headwind for the artificial intelligence sector. However, the market reaction suggests traders are treating the election as a clearing event rather than a structural change to the AI buildout.

The election served as a referendum on data center expansion. While few candidates proposed actual moratoriums, the Democratic sweep signaled voter frustration with the rapid proliferation of data centers. This political pressure could slow new construction. Cramer noted that a slower buildout might benefit established technology giants by easing competition. Morning rallies in Microsoft and Amazon shares hinted that the market may be pricing in this scenario.

Advanced Micro Devices saw its shares give back overnight gains despite posting a strong quarterly report. The company’s performance significantly outpaced expectations set three months prior. AMD also reported dramatic gains in server market share, surpassing Intel. Lisa Su, the company’s chief executive, warned that personal computer shipments would drop by double digits next year due to high memory prices.

High memory costs are suppressing demand for PCs. This dynamic could free up supply for other sectors. Bernstein raised its price target for Apple to $380 from $370, maintaining a buy rating. The firm believes a potential slowdown in data center expansion could also benefit the iPhone maker’s hardware costs.

Arista Networks shares climbed more than 5% after the company reported third-quarter revenue, operating margin, and earnings per share all above consensus estimates. The firm also guided for a fourth quarter well above market expectations. Demand for its networking switches remains strong, and the company is expanding into server rack networking. Qnity Electronics, a DuPont spin-off, also beat expectations with 22% organic revenue growth driven by advanced semiconductor manufacturing needs.

CVS Health announced it is splitting into two separate entities. CEO David Joyner described the move as coming from a position of strength. The split separates the insurer Aetna and pharmacy benefit manager Caremark from the retail pharmacy business. CVS shares fell 4% despite a third-quarter earnings beat. Novo Nordisk shares rose 6% after the Danish drugmaker increased its full-year sales and profit guidance, driven by strong sales of its GLP-1 obesity and diabetes treatments.

Constellation Brands was downgraded to a hold by Bank of America following the election. Analysts cited reduced downside risk to beer volumes due to a lower likelihood of strict immigration measures. McDonald's shares rose more than 2.5% after the company beat estimates for earnings and same-store sales growth, even though total revenue missed expectations. The stock has gained 14% since the close of business on October 7.