What midterm results mean for policy and data center risk

Divided government should leave the broad market outlook intact, but state-level data-center restrictions introduce political and execution risks for the AI infrastructure cycle into 2027.

• Democrats are projected to control both chambers of Congress, but even 55 Senate seats would not provide enough votes to override a presidential veto, limiting major legislation and spending changes through 2028.
• Markets initially rallied: S&P 500 futures gained 1%, the dollar fell against all major currencies, and the 10-year Treasury yield declined two basis points to 4.93% as investors priced in less fiscal expansion and borrowing.
• The administration's proposed $1.5 trillion defense budget for 2027 could face congressional constraints, while trade policy remains largely under executive control and current tax and spending policies are expected to remain mostly intact.
• Democrats will hold the governorships of Texas, Georgia and Ohio for the first time since 1987, and incoming governors in all three states have backed proposals to pause or restrict new data-center construction.
• Restrictions could delay projects or raise costs across construction, HVAC, electrical equipment, industrial machinery, utilities and AI hardware; Texas is especially important because it represents roughly a quarter of the U.S. development pipeline.

Takeaway: Russell Investments keeps its resilient-growth and robust-earnings market view, but investors should monitor whether state moratorium proposals become law, slow AI capital spending, disrupt suppliers and eventually affect economic growth or corporate earnings.