Congressional Map Shapes AI Policy Direction
With the US midterm elections approaching, Asian markets focused on artificial intelligence and semiconductor supply chains face a policy variable. According to Bloomberg, strategists say if Democrats take full control of both the House and Senate, stricter scrutiny of the AI industry and data center construction is expected; conversely, if Republicans hold Congress, higher policy continuity is likely, benefiting chipmakers in South Korea and Taiwan and other suppliers in the US tech boom. Current polls and prediction markets show a high probability of Republicans losing House control, while control of the Senate remains uncertain.
AI Trade at a Sensitive Moment
The report notes this election comes at a sensitive moment for Asian AI trade. Investors already face concerns over high borrowing costs, how long the memory-chip boom can last, and whether debt-driven AI infrastructure spending can generate sufficient returns. As AI safety, data center development and electric Powertech costs become increasingly politicized in Washington, the election adds uncertainty to markets. Phillip Wool, Head of Portfolio Management at Rayliant Global Advisors, said if Democrats sweep, these issues could become more pressing and trigger another pullback in AI stocks, and any threat to AI would heavily hit market sentiment in South Korea, Taiwan, Japan and even China.
Taiwan and South Korea Supply Chains in the Crosshairs
Compared with most regions, Asia has more at stake in the AI investment boom, with South Korea and Taiwan supplying large volumes of advanced semiconductors and other key hardware supporting US data center construction. If a Democratic-controlled Congress tightens scrutiny, the region could be exposed to risk, with possible focuses including requiring AI developers to bear more data center power costs, and strengthening congressional oversight of trade and technology policy. Afdhal Rahman, Executive Director of Wealth Advisory at Bank of Singapore, noted that potential changes to US AI infrastructure, data center development or technology restrictions could ultimately reverberate through Asian supply chains. Taiwan stocks named were TSMC (2330), Hon Hai (2317), Quanta (2382) and Delta Electronics (2308), along with Samsung Electronics, SK Hynix and Advantest. Pruksa Iamthongthong, Head of Asia Pacific Equities at abrdn, believes South Korean and Taiwanese chipmakers remain indispensable to structural investment, especially well-positioned ones able to weather different election outcomes.
Green Energy Trade and Energy Prices in Focus
The election could also affect Chinese equities. Phillip Wool noted a Democratic sweep and its stronger support for clean energy could improve sentiment toward Chinese solar, battery and EV companies. If Democrats control Congress and constrain Trump's domestic agenda, it could force the administration to rely more on executive power, making trade an area where the White House still has room to act. Stocks named include CATL, BYD, Sungrow Power Supply, LONGi Green Energy Technology and JinkoSolar. On the other hand, Kazuyuki Muramatsu, Head of Investment Management at Nagomi Capital, and others cautioned the usual post-election market rally could be broken, as Trump has hinted the US military could resume strikes on Iran after the election, raising the risk of surging energy prices, and if oil climbs to 120 dollars per barrel, it would overshadow positive post-election expectations.
Dollar and Market Confidence Add Uncertainty
On currencies and bonds, Richard Franulovich, Head of FX Strategy at Westpac Banking Corp., said if Democrats sweep, signs of US-Iran compromise increase, plus tighter scrutiny of AI and data center spending, the dollar's recent rally could reverse. He also noted if the race is close, leading to recounts or legal challenges, it could also shake confidence in US institutions.