Axios

The Democratic Party's blue wave in Tuesday's midterm elections washed over Wall Street Wednesday, sending stocks sharply higher.

Here are five key takeaways for investors:

Democrats' midterm tsunami obscured a major polling miss: Surveys correctly anticipated a blue wave, but failed to capture its full force.

Why it matters: Pollsters appear to have underestimated Democrats by a wider margin than they underestimated Republicans in 2016 or 2024 — even if they got the headline outcome right this time.

House Minority Leader Hakeem Jeffries (D-N.Y.) formally launched his bid for speaker of the House on Wednesday in a letter to colleagues obtained by Axios.

Why it matters: Jeffries is widely expected to secure the speaker's gavel after House Democrats' landslide midterm win. He would make history as the first African American to serve in the role.

Republicans barely had time to absorb their sweeping midterm losses before President Trump returned to a familiar comfort zone: D.C. construction projects.

Why it matters: Voters just delivered an overwhelming rebuke of the administration, demanding that politicians focus on the cost of living, yet the president remains fixed on remaking the nation's capital in his image.

Republicans woke up "in shock" Wednesday morning after they got hit with the biggest midterms wave in 50 years. Within hours, that shock was turning into rage.

Why it matters: The battle for control of what's left of the Republican conference — headlined by Majority Leader Steve Scalise (R-La.) and Judiciary Chair Jim Jordan (R-Oho) — is the first salvo in a quest to bring GOP lawmakers back from the political wilderness.

Several Democratic underdogs pulled off midterm upsets — or were poised to — despite raising a fraction of the money collected by their Republican opponents.

Why it matters: The upsets show the limits of campaign cash, even in one of the most expensive elections in history.

At least five progressive faith leaders won midterm elections in traditionally Republican states, bringing new religious voices into elected office

Why it matters: Democrats' sweeping congressional victory suggests progressive candidates can use religious messaging to reach voters in states where Republicans have traditionally dominated faith-based political appeals.

Republican mapmakers thought they were drawing at least a dozen comfortably red districts to protect their House majority.

Why it matters: They weren't red enough.

Oil prices fell sharply Wednesday as traders weigh signs — including a widely circulated post by Vice President JD Vance — that the midterm election will add pressure on the White House to find an offramp from the Iran conflict.

Why it matters: Elections have consequences.

Tuesday's election was great for Democrats. It was bad for Defense Secretary Pete Hegseth and some of the White House's most ambitious national security projects.

Why it matters: Surprise wins across the map for Democrats — including in the Deep South — complicate a lot for the Trump administration.

Democrats' sweeping statehouse gains Tuesday have opened a path to effectively replacing the Electoral College with a national popular vote in time for the 2028 presidential election — without needing to amend the Constitution.

Why it matters: The results could give Democrats the legislative power to fundamentally change how America picks its president, potentially ending the possibility of winning the White House while losing the national popular vote.

Democrats wasted no time gloating and warning the Trump administration about a pending flood of subpoenas and investigations once the 2026 midterm blue wave became clear.

Why it matters: Democrats are eager to exercise their oversight powers over the president and his allies, but they must navigate that while addressing Americans' No. 1 election concern — the high cost of living.

The Iran war was the reason for the Democrats' blue tsunami that stunned Washington, Vice President Vance said in an X post Wednesday morning.

Why it matters: The VP offered a surprisingly blunt assessment of why the GOP got crushed Tuesday night — and started to put at least a little daylight between himself and President Trump as the 2028 cycle begins.

Women candidates won enough races Tuesday to set a new record for Democratic women's representation in the U.S. House — among other historic firsts in Congress and governor's races nationwide.

The big picture: The spike for Democratic Women's Caucus members in the House alone marks an increase of more than 60% since 2016.

A recurring subplot of President Trump's term has been a desire to replace Biden appointees to the powerful Federal Reserve Board of Governors — even ahead of their terms ending — with allies. That effort now looks dead in the water.

Why it matters: Even if Trump succeeds in his efforts to fire governor Lisa Cook, or to oust any of the other three Biden-era holdovers on the seven-member board, a Democratic Senate will likely block any replacements it views as insufficiently independent from the administration.

World leaders are reacting to Democrats' comprehensive midterm wins, which saw them retake the Senate and flip the House on Tuesday night.

Why it matters: The results could reshape President Trump's final two years in office, with major implications for U.S. relations with allies and adversaries alike.

The stunning Democratic victory in midterm elections Tuesday will have consequences for U.S. economic policy. But they are likely to be subtle, and revealed over time.

The big picture: President Trump has, for the most part, shaped economic policy through executive action rather than by passing laws. His executive powers will remain intact even after Democrats take hefty majorities in both the House and Senate in January.

Republicans' election-night bloodbath has touched off a bitter leadership battle, with both Majority Leader Steve Scalise and Judiciary Chair Jim Jordan vying to replace Mike Johnson as leader of the House GOP.

Why it matters: Whoever wins the minority leader post will play a pivotal role in trying to lead Republicans back out of the political wilderness after their crushing midterm losses.

House Speaker Mike Johnson (R-La.) told his Republican colleagues Wednesday that he will not seek a leadership position in the next Congress, citing the toll the job has taken on his family, according to a letter to his colleagues obtained by Axios.

Why it matters: Johnson's decision to step aside has opened the door to a leadership showdown between House Majority Leader Steve Scalise (R-La.) and Judiciary Committee Chair Jim Jordan (R-Ohio), as Republicans grapple with losing their House majority.

Venture capitalists love to talk about pivoting. Good. They're gonna have to.

The big picture: This isn't about personal politics, although there are certainly some venture frontrunners who will hope that folks memory-hole the past two years.

• It's about how the investment math may have just changed for AI — which now dominates venture investments and returns.

Speaker Mike Johnson (R-La.) plans to step down as the House's top Republican after his party's epic midterm election losses wiped out their majority, according to a person familiar with his plans.

Why it matters: Johnson's exit touches off a potentially contentious scramble to replace him with Republicans days away from choosing their next leaders.

Democrats' big night gives them a chance to turn voter anger over high energy prices into legislative action and congressional oversight, but divisions within the party could complicate their plans.

Why it matters: This was an energy election.

We are waking up to a lot more clarity about the election than anyone, even Democrats with the wildest imaginations, had anticipated Tuesday.

Why it matters: For investors, less uncertainty could mean better returns, per an intriguing analysis from equities analysts at Bloomberg Intelligence.

Zoom in: They looked at 20 midterm cycles, back to 1946, and found that returns for the S&P 500 have been historically subdued leading into the midterms and higher once they were over.

By the numbers: The average gain on the S&P 500 in the three months heading into an election was about 1.8% on average.

• In the three months after, it's 7.5%. (These gains don't include dividends.)
• The analysts didn't include S&P returns this year, but a quick glance reveals that they indeed have been slumpy. Coming into Tuesday, the index was down 0.8% since August.

Yes, but: It doesn't happen every time. Three-month returns after a midterm exceeded pre-midterm returns 15 out of 20 times.

The latest: Though U.S. stock futures were in the green early Wednesday morning, under the hood some assets were faring less well.

• Shares of Republican mega-donor Elon Musk's companies Tesla and SpaceX were both down more than 4% in pre-market trading.

The other side: Billionaires do appear on track for at least one win: In California, a measure that would have enacted a 5% wealth tax on individuals and trusts with more than $1 billion in assets appeared headed for defeat after facing heavy opposition from Silicon Valley.

What to watch: The AI trade is under the lens. In a race investors were watching closely, Texas elected Democrat Gina Hinojosa governor. She has suggested a moratorium on new data centers until tougher regulations can be put in place.

• The state accounts for 41% of new U.S. capacity expected in 2028, according to the research firm SemiAnalysis.
• Out of 41 data center measures on the ballot across 10 states, about two dozen proposals intended to restrict or block development appeared to have passed based on initial returns, Axios' Maria Curi reports.
• "Data centers in space look pretty appealing right now," Musk posted late Tuesday night.

Zoom out: "We expect Democrats to use fiscal deadlines to seek to limit the war with Iran, roll back selected tariffs, and reverse spending cuts enacted last year," Goldman Sachs economists wrote Wednesday morning. They don't expect changes to AI regulation at a national level.

Between the lines: With a Democratic majority assured in both chambers of Congress and a Republican in the White House, we're probably in for two years of political gridlock.

• Markets typically like that, says Christopher Cain, global head of equity strategy at Bloomberg Intelligence.
• "The question for markets was whether such a large margin of victory would be contested by the administration or accepted," writes investor Bob Elliott Wednesday morning. "Before midnight it had been accepted, and the uncertainty of a prolonged conflict appeared to be off the table," he writes, calling the gains in the futures market a "relief rally."

The bottom line: While we can't be certain what happens next in markets, we do know that we'll be seeing fewer political ads — and that is enough to brighten any mood.

Palantir Technologies, the AI-driven analytics platform known for its work for the military, reported better-than-expected quarterly sales and earnings and raised its full-year sales guidance, yet still its stock slumped.

Why it matters: Such a lackluster response to an erstwhile favorite of retail traders underscores how investor psychology has shifted from the FOMO-fueled run-up between 2023 and 2025 to today's gnawing concerns about the durability of the AI boom.

The big picture: In recent years, the AI software company had been one of the top gainers in the S&P 500, which Palantir joined in September 2024.

• Its shares rose roughly 340% in 2024 and 135% last year, riding a combination of retail enthusiasm, AI-related optimism, interest in military technology and its perceived advantages of connections to the Trump administration. (The company's co-founder, chairman and top individual shareholder is billionaire Republican megadonor Peter Thiel.)

Yes, but: Palantir's roughly 2,000% increase in its stock price over the last four years vastly outpaced the company's actual fundamentals, resulting in valuation metrics that ranged from the extreme to the arguably lunatic.

• Palantir's forward price-to-earnings ratio peaked at 255 times in November 2025 and was over 100 times well into this year.
• A fairly valued company is traditionally considered around 15 times. The S&P 500 is currently about 18.5 times.

Palantir's forward price-to-sales multiple, meanwhile, topped out at more than 90 times in November 2025.

• For those not accustomed to these kinds of measures, that is mind-blowing.
• As a point of comparison, the S&P 500 currently has a forward-price-to-sales ratio of 3.1 times.

Between the lines: Then a funny thing happened. Palantir really started delivering the goods, financially speaking.

• Earnings per share jumped 64% in 2024, 83% in 2025, and they're expected to rise 122% when 2026 is done and dusted.
• Sales accelerated too, rising 29% in 2024 and 56% in 2025. They are expected to jump 89% this year.
• There's more. Margins expanded, as did backlogs. Costs stayed in check. Palantir's U.S. commercial division, focused on selling software to help companies use AI more productively, saw sales soar.

Zoom in: Analysts say one blemish on Palantir's third-quarter numbers — which it released Monday after the close — was that its order backlogs were largely flat quarter over quarter.

• That might seem a small nit to pick. But it touched a nerve for investors increasingly concerned about the sustainability of the AI trade.

What they're saying: "Over the past three months, tech investors have placed greater scrutiny on the results of companies across the AI ecosystem," wrote Louie DiPalma, who covers Palantir for the brokerage firm William Blair.

• "The valuations for many AI supply chain providers have been cut in half on concerns that recent growth is unsustainable."
• Likewise, Brent Thill, who covers Palantir for Jefferies, noted that "the debate is increasingly about sustaining acceleration against a larger base, rather than whether underlying demand remains strong."

The bottom line: None of this means that Palantir is troubled. In fact, just the opposite: The company has done so well that it has become harder and harder to wow the market, or as Thill puts it, "comps keep getting tougher."

• But it also suggests a subtle shift among the investing public toward caring about the realities of the present, rather than seeing only limitless AI upside ahead.

Democrats will be able to take plenty of messaging votes on health care after their blowout wins Tuesday — but they'll face too many limits and internal disagreements to force all of the big policy changes they want.

Why it matters: They'll have a tough time repealing Medicaid cuts or restoring enhanced Affordable Care Act subsidies while President Trump is still in office, and their own divisions will hold them back on other issues.

• And Medicare for All? Last night gave the idea a big boost, but don't hold your breath.

Make no mistake: Democrats won by epic, sometimes historic margins across red and blue states, up and down ballots, obliterating almost everything President Trump, and a Republican Party remade wholly in his image, built over the past decade in American politics.

Why it matters: Trump and Republicans are left with a mostly white, mostly old House and Senate minority, confronting a younger, more diverse ascendant Democratic Party with power and margins it hasn't held in 18 years, since the dawn of the Obama era.

The results speak louder than any words we can write:

Voters showed deep distrust of the AI race Tuesday, approving dozens of data center moratoriums and electing a raft of candidates who favor slowing a $10 trillion buildout, including in Texas — the epicenter of the boom.

Why it matters: In an election that hinged on an affordability crisis for many Americans, voters made it clear they view Silicon Valley's AI ambitions not as a technological miracle, but as a resource-draining threat to their wallets and communities.

• The results were a warning shot to some of the nation's wealthiest and most powerful executives, many of whom are already working on ways to build a more palatable version of the revolution they are dead set on winning.

House Minority Leader Hakeem Jeffries (D-N.Y.) is set to preside over a commanding Democratic majority after his party swept districts President Trump carried by double digits.

Why it matters: Democrats' landslide win will make it much, much easier for the likely next speaker to secure the gavel without a sweat and ignore the demands of his progressive wing.

President Trump's Republican Party suffered an electoral humiliation Tuesday night that stretched across the battleground map and into some of the deepest-red territory in America.

Why it matters: The 2026 midterms will go down as one of the most sweeping repudiations of a sitting president in modern American history, on a scale reminiscent of the post-Watergate reckoning of 1974.

It was a drubbing on a scale that neither side saw coming: Democrats pummeled Republicans across the battleground map and into some of the most MAGA-friendly terrain in the country.

Why it matters: The results were an emphatic rejection of Donald Trump's second term in office — and set the stage for two years of corruption investigations and legislative frustration for the lame-duck president.

Texas woke up red on Tuesday and went to bed blue.

Why it matters: Just months ago, Democratic campaigns in the MAGA heartland appeared quixotic — obligatory more than realistic.

Republicans tried to save their House majority with a bold wave of mid-cycle redistricting. It failed in spectacular fashion on Tuesday.

Why it matters: Republicans not only fell short of winning seats in several districts they redrew to favor their candidates, they put some GOP incumbents in danger of losing by spreading their support thin.

Republicans lost deep-red Senate seats in South Carolina, Kansas and Texas as well as House seats nationwide, AP projects, giving Democrats control of both chambers of Congress.

Why it matters: President Trump made himself the face of the GOP campaign for control. Now his party is losing all over the map, and he's distancing himself from the outcome.

Democrat Abdul El-Sayed defeated Republican Mike Rogers in Michigan's closely watched U.S. Senate race, the Associated Press projected. He will become the nation's first Muslim senator.

Why it matters: El-Sayed's win shows how an unapologetically progressive candidate can win in a battleground state President Trump carried just two years ago.

In red states and blue, Republicans suffered losses on a scale even Democrats would never have dared to dream about 24 hours ago.

Why it matters: Democrats worried that polls showing a blue wave were overestimating the party's strength. It turned out polls underestimated the size of the Democratic romp — by a lot.

Latino voters helped Democrats break Republicans' decades-long grip on Texas and reclaim both chambers of Congress on Tuesday, casting doubt on President Trump's historic 2024 gains with the fast-growing electorate.

Why it matters: Republicans bet Trump's Latino breakthrough two years ago would create a lasting GOP realignment in Texas and beyond. Tuesday's results exposed how quickly those gains could unravel — and raised new questions about Republicans' coalition heading into 2028.

Democrat Jocelyn Benson won the Michigan governor's race Tuesday over Republican John James.

Why it matters: The purple-state victory is a show of strength for Democrats.

• Benson will succeed term-limited Democrat Gretchen Whitmer, extending blue leadership after decades of flipping between Democrats and Republicans about every eight years.

Elon Musk cracked jokes early Wednesday morning after the Republican candidates he spent record sums supporting got drubbed in historic midterm elections.

Why it matters: No one has ever spent as much as Musk for so little payoff — especially in Texas, which ended up with a massive blue wave.

Maine Democrat Troy Jackson defeated Sen. Susan Collins, AP projects, toppling a nearly 30-year Republican incumbent famous for defying political gravity.

Why it matters: Democrats recaptured the Senate, and they succeeded in taking down a political white whale.

Senate Republicans' worst nightmare came true Tuesday night, as they watched red state after red state fall to a historic Democratic wave.

Why it matters: It's hard to remember now, but Republicans started off the 2026 cycle thinking they could expand their majority. They ended the night with what one source called a "huge f**king thumping" — losing or trailing in every toss-up on the map.

On a historic election night, winners nationwide have broken longstanding barriers, including firsts for race and sexuality.

The big picture: The results mark major milestones for representation in American politics as the nation's political landscape continues to evolve.

Democrat Peggy Flanagan defeated Republican Michele Tafoya in Minnesota's U.S. Senate race, the Associated Press projects, keeping a key seat in Democratic hands.

The big picture: Voter anger over President Trump's policies — including his administration's immigration crackdown — helped propel the progressive Democrat to victory.

• Flanagan's win denied Republicans the opportunity to flip a Senate seat that Democrats have held for nearly a quarter-century.

President Trump lashed out at Fox News on election night, attacking the network's personalities, polling and coverage as voters awaited midterm election results.

Why it matters: Trump, who has repeatedly dined with Fox News patriarch Rupert Murdoch and hired talent from the network, has come to expect favorable coverage. But Fox's editorial decisions this election cycle suggest it isn't always willing to oblige.

President Trump said Republicans would have won Tuesday's midterm elections had he been on the ballot.

Why it matters: After raging on social media before major races were called, Trump reacted to the results for the first time Tuesday night as a blue wave began to take shape.

SHREVEPORT, La. — The GOP's election-night defeat has unleashed a wave of finger-pointing inside the House Republican conference, with members questioning whether Speaker Mike Johnson or any of the other top deputies can survive next week's leadership elections.

Why it matters: Johnson spent months insisting Republicans would defy the odds and keep the House. But after losing the majority, he cast the defeat as all but inevitable, an explanation unlikely to satisfy Republicans ready for a new leadership slate.

Democratic state Rep. Josh Turek defeated Republican U.S. Rep. Ashley Hinson in a major upset Tuesday, becoming the first Democrat elected to the U.S. Senate from Iowa since 2008, the AP projected.

Why it matters: Turek's victory delivers Democrats control of the Senate — and signals a political backlash against Republicans in a state Trump won comfortably just two years ago.

Democrat Adam Hamilton beat Republican Sen. Roger Marshall, AP projects. Hamilton will be the first Democrat that Kansas sends to the U.S. Senate since 1932.

Why it matters: Successfully flipping the country's longest-held Republican Senate seat gives Democrats' efforts to win a Senate majority a significant leg up.

Rob Sand has won Iowa's governor's race, becoming the first Democrat to lead the state in 20 years by defeating Republican Zach Lahn, AP projects.

Why it matters: Sand's victory marks a major breakthrough for Iowa Democrats, who have struggled to win statewide elections during Iowa's red shift over the past decade.

Socialism is on the march in President Trump's second term: At least five new democratic socialists officially won election to the House on Tuesday, according to AP projections.

Why it matters: Democratic socialists' growing ranks in Congress could be a headache for Hakeem Jeffries, as some have signaled that they're willing to play hardball to push for progressive policies.

Democrat Gina Hinojosa pulled off a stunning upset Tuesday, defeating three-term Republican Gov. Greg Abbott and becoming the state's first Latina governor, AP projects

Why it matters: The victory ends 32 years of Republican control of the governor's office in one of the nation's biggest GOP strongholds. It's a major breakthrough for Democrats who have spent decades trying to turn Texas blue.

Former Democratic Sen. Sherrod Brown is headed back to Capitol Hill after flipping a hotly contested seat by ousting Sen. Jon Husted (R), the AP projects.

Why it matters: Ohio is a key pickup for Democrats in their quest to wrest control of the Senate, with both parties sending in big names to campaign in the state and pouring out their war chests to try to secure the seat.

Democrat James Talarico defeated Republican Ken Paxton in Texas' closely watched U.S. Senate race, delivering a historic breakthrough for Democrats in a state Republicans have dominated for decades.

Why it matters: Talarico's victory ends the nation's longest Democratic drought in statewide elections and flips a critical Senate seat as Democrats fight for control of the chamber.

Democrat Xavier Becerra beat Republican Steve Hilton handily in the California governor's race on Tuesday, becoming the state's first Latino governor in more than 150 years.

• Becerra was expected to win the state where 45% of voters are registered Democrats and 25% are Republicans.

State of play: Becerra was largely out of the public eye after narrowly defeating businessman Tom Steyer in the June primary.

Democrat Amy Acton has defeated Republican Vivek Ramaswamy in Ohio's fiercely contested gubernatorial race, the Associated Press projected.

Why it matters: Acton's victory marks a major Democratic breakthrough in a state that has shifted right, ending almost 16 years of Republican control of the governor's office and making her Ohio's first elected woman governor.

Democrat Annie Andrews pulled off a stunning upset in deep-red South Carolina, defeating Republican Sen. Darline Graham, AP projects.

Why it matters: Andrews' victory flips a longtime Republican stronghold and gives Democrats a crucial pickup in their battle for Senate control. It's the first time a Democrat has won a U.S. Senate race in the state since 1998.

Democratic Sen. Jon Ossoff has won reelection in Georgia, defeating Republican challenger U.S. Rep. Mike Collins to secure a second term.

Why it matters: Ossoff's victory delivers a critical Senate hold for Democrats in a battleground state President Trump narrowly carried in 2024, denying Republicans a pickup they had once viewed as a major opportunity.

For the first time in history, three Black women will serve simultaneously in the U.S. Senate when Illinois Lt. Gov. Juliana Stratton takes office in January.

Why it matters: More than 235 years after the Senate first convened, two Black women served simultaneously for the first time. Two years later, that number will grow to three.

Keisha Lance Bottoms defeated Republican Rick Jackson to become the first Black woman governor in U.S. history, the Associated Press projects.

Why it matters: Bottoms' win flips the battleground state's governor's office from red to blue for the first time in more than two decades, setting the stage for a partisan power play the Georgia Capitol hasn't felt since the early 2000s.

U.S. Rep. Byron Donalds defeated Democrat David Jolly in Florida's governor's race, keeping the office in Republican hands, the Associated Press projected.

Why it matters: Donalds' victory makes him Florida's first Black governor and extends the GOP's decades-long hold on what was once a swing state.

• The race was close, with Donalds leading by less than 2% when AP called the race in his favor.

Republican Ashley Moody narrowly defeated progressive Democrat Angie Nixon in Florida's U.S. Senate race, keeping the seat in GOP hands.

Why it matters: Moody's victory preserves a Republican stronghold and denies Democrats a potential pickup in their bid to win Senate control.

Democrat Roy Cooper has defeated President Trump's handpicked candidate, Michael Whatley, flipping one of North Carolina's two GOP-held U.S. Senate seats.

Why it matters: Cooper, the popular two-term governor, delivered Democrats one of their best shots at flipping a Republican-held Senate seat. Even in a state that voted all three times for Trump, Cooper has never lost an election.

Democratic Rep. Chris Pappas defeated former GOP Sen. John Sununu in the New Hampshire Senate race, AP projects, becoming the first openly gay man elected to the U.S. Senate.

Why it matters: Pappas' victory keeps the seat in Democratic hands and could boost the party's chances of taking control of the Senate.

President Trump declared outer space open for exploration and development in a sudden election night proclamation.

Why it matters: The mostly symbolic edict doubles down on Trump's December 2025 mandate calling for Americans to return to the moon by 2028 and, eventually, land on Mars amid a heated space race with China.