Nov 4 (Reuters) - US stock index futures rose on Wednesday, reversing sharp early losses, as investors weighed the Democrats' sweeping midterm victories and what they could mean for AI spending and regulation.
Democrats took control of both the Senate and House, scoring wins in Republican strongholds for the first time in generations and ushering in a new era of divided government in Washington.
Global stocks swung between gains and losses as investors weighed the prospects of tougher regulation, higher taxes and oversight of areas such as AI and cryptocurrencies.
US stock futures had initially declined after the results, with Nasdaq-100 futures falling as much as 2.4% and S&P 500 futures down 1.4%. However, they clawed back those losses after US President Donald Trump accepted the election results and acknowledged that the war in Iran played a role in Republicans' losses.
"This has helped ease some concerns about prolonged political confrontation and legislative gridlock, although his continued veto powers mean significant policy disagreements remain likely," said Daniela Hathorn, senior market analyst at Capital.com.
At 4:22 a.m. ET, Dow E-minis were up 436 points, or 0.84%, and S&P 500 E-minis were up 26.75 points, or 0.35%. Nasdaq-100 E-minis were up 44.75 points, or 0.16%.
The AI trade will be in focus after Democrats made gains in key data-center states, where public opposition to the industry's rapid expansion has been growing.
Aidan Yao, senior investment strategist for Asia at the Amundi Investment Institute, said restrictions on the AI boom could inject significant uncertainty into the outlook for the US economy, inflation and monetary policy.
Shares of data center-related companies dropped in premarket trading, with IREN (IREN.O), Hut 8 (HUT.O), and Applied Digital (APLD.O), all trading lower. Neoclouds Nebius (NBIS.O), and CoreWeave (CRWV.O), also fell.
Shares of some the biggest hyperscalers were mixed. Amazon.com (AMZN.O), Microsoft (MSFT.O), and Meta Platforms (META.O), were trading higher, while Alphabet (GOOGL.O), lagged with a 0.3% decline.
Elon Musk-led SpaceX (SPCX.O), and Tesla (TSLA.O), fell around 4% each.
The AI trade has been under pressure as investors grow wary of Big Tech's soaring AI spending and little evidence of adequate returns. The tech-heavy Nasdaq-100 (.NDX), confirmed it had entered a technical correction on Monday.
Meanwhile, AMD (AMD.O), jumped 6.2% after the chipmaker forecast faster-than-expected 2027 growth as its data-center sales surge and its multibillion-dollar challenge to Nvidia gathers pace.
Broader chip stocks were also among early gainers, with Nvidia up 0.5%, Micron Technology (MU.O), rising 0.1% and Broadcom (AVGO.O), climbing 0.2%.
Ride-hailing firm Uber (UBER.N), , fast-food chain McDonald's (MCD.N), and health insurer CVS Health (CVS.N), are some of the prominent companies reporting before the bell on Wednesday.
Shares of solar companies were among early gainers as well, with SolarEdge Technologies (SEDG.O), up 3%, First Solar (FSLR.O), 8.1% and Canadian Solar (CSIQ.O), 7%.
Investors will also look out for the impact on the US' deteriorating fiscal picture, as political gridlock may make it harder to agree on new spending. Yields on long-dated Treasuries, which move inverse to prices, moved lower on the day.
Reporting by Shashwat Chauhan in Bengaluru; Additional reporting by Jiaxing Li; Editing by Mrigank Dhaniwala and Saumyadeb Chakrabarty
