The midterms are approaching. What they could mean for the stock market — and the AI trade

The artificial intelligence trade that has powered U.S. stocks to record highs this year could face some headwinds from an unusual source: the midterm elections. The S & P 500 hit an all-time high this week, topping 7,600 for the first time, as investors continue to pile into AI-related names such as Nvidia and Micron Technology . In fact, the VanEck Semiconductor ETF (SMH) has soared 74% year to date, and the S & P 500 has advanced 11%. But as the Nov. 6 U.S. midterm elections approach, AI names could hit some bumps in the road, particularly as Democrats are expected to flip at least the House of Representatives. A divided government could make it more difficult for companies in the space to move forth with their agenda. "Two areas that you're seeing increasing as a focus for Democrats are potential data center moratoriums. I don't think that passes, but if we're talking about data center moratoriums, there is a lot of market cap that is tied to the building and profitability and success of the AI trade," Ed Mills, Washington policy analyst at Raymond James, told CNBC. SMH YTD mountain SMH in 2026 In recent months, there has been a pushback on the data center boom , with political figures citing rising electricity costs and risks to grid stability as among the list of concerns. Mills also believes that the Democrats could push President Donald Trump on adopting a more hawkish stance on China. This could further restrict the trade of semi-cap equipment between the U.S. …