[2026 US Midterm Elections] Trump's Historic Defeat! What Will Happen to US Stocks, Japanese Stocks, and the Dollar-Yen? A Thorough Analysis of the Impact on AI Semiconductors …
November 6, 2026
In the US midterm elections held on November 3, 2026, the Republican Party led by President Trump suffered a historic defeat.
The Democratic Party won a majority in both the Senate and the House of Representatives. This has placed significant constraints on President Trump’s policy management.
And the financial markets have already begun to move significantly.
Although US stocks surged immediately after the election, they plummeted the following day, led by AI and semiconductor-related stocks. Japanese stocks also saw the Nikkei Stock Average fall sharply, and the foreign exchange market showed a trend of a weaker dollar and a stronger yen.
However, it would be a mistake to simply think of this election result as ‘Trump’s defeat = lower stock prices’.
Rather, while some companies will benefit from the restrictions on the Trump administration’s policies, others will have to significantly revise their growth scenarios.
In this article, I would like to delve into the impact on US stocks, Japanese stocks, foreign exchange, the AI industry, crude oil, defense, interest rates, and the global economy, and consider future investment strategies.
1. What does President Trump’s defeat mean?
First, it is important to note that Trump has not lost his position as president in this election.
What was held this time was not a presidential election, but a midterm election to choose members of Congress.
The Democratic Party has regained the majority in both houses of Congress, and the political system in which the Republican Party controlled both the president and Congress has collapsed.
Because of this, US politics will change significantly.
① It will become harder for the Trump administration’s major policies to pass
Policies that require congressional approval, such as tax cuts, government spending, budget formulation, and legal amendments, will become difficult to realize.
② Oversight of the administration by the Democratic Party will be strengthened
It is highly likely that the Trump administration’s policies will be strictly scrutinized through congressional hearings and investigations.
③ President Trump may actively use presidential powers
If it becomes difficult to realize policies through Congress, he may shift his focus to executive orders, trade authority, and foreign and security policies.
However, just because the Democratic Party controls Congress does not mean that all of their policies will be realized.
This is because President Trump has veto power over bills, and the Democratic Party has not secured enough seats to override it on their own.
The new Congress will convene on January 3, 2027.
In other words, we are entering a situation where a “divided government” with the president and Congress at odds will make significant policy changes difficult.
For financial markets, such political gridlock is not necessarily a bad thing.
This is because it may become harder to implement extreme policies, potentially making it easier for companies to formulate long-term business plans.
On the other hand, if both parties clash over the budget or debt ceiling, government shutdowns and fiscal issues could become sources of market anxiety.
2. Impact on US Stocks—Why did they plummet the day after rising?
The most notable aspect of this election is the intense volatility of US stocks.
US Market on November 4, 2026
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NY Dow: +3.03%
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S&P 500: +1.58%
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NASDAQ Composite: +1.44%
However, the situation changed completely the following day, the 5th.
US Market on November 5, 2026
Investor sentiment shifted dramatically in just one day.
Why did this happen?
The rise on November 4th was driven by the resolution of uncertainty surrounding the election results, as well as a positive market reaction to President Trump accepting his defeat and showing a willingness to cooperate with the Democratic Party.
Furthermore, crude oil prices plummeted due to expectations that the war with Iran would move toward a resolution, and the easing of inflation concerns also pushed stock prices higher.
However, investors soon began to notice another issue.
That is the possibility that the Democratic Party’s landslide victory will lead to stricter regulations on the AI industry.
In particular, if US data center construction plans are restricted, it will affect the future earnings of companies involved in AI semiconductors, memory, power equipment, and construction.
This concern led to the significant stock market decline on November 5th.
What we can learn from this market reaction is that the performance differences between sectors have become much more important than the overall direction of US stocks.
3. The biggest problem is the AI industry—will it trigger the collapse of the semiconductor bubble?
I believe that the area we should be most cautious about following this election result is AI-related stocks.
The issue that will be particularly problematic is the massive investment in AI data centers.
Until now, companies like Microsoft, Amazon, Google, and Meta have been proceeding with data center construction and GPU purchases to secure AI computing power in the US.
As a result, the performance of semiconductor-related companies, centered on Nvidia, has expanded rapidly.
However, in this election, several politicians who take a cautious stance on data center construction were elected.
Data centers have the following problems:
1. They consume massive amounts of electricity.
2. They require large amounts of water for cooling equipment and other purposes.
3. They may cause local electricity rates to rise.
4. The jobs created locally may be limited relative to the massive capital investment.
5. They place a heavy burden on power grids and local infrastructure.
Due to these issues, local opposition to construction plans is also intensifying.
Estimates reported as an analysis by Goldman Sachs point out that if a moratorium on data center construction were applied broadly, approximately 45% of planned capacity expansion in the US could be affected.
Of course, this does not mean that 45% of construction will actually be canceled.
However, market expectations regarding the growth rate of AI capital expenditure could change significantly.
Companies to watch among AI-related stocks
NVIDIA (NVDA)
The stock price fell by approximately 9.3% on November 5th.
As it has been the greatest beneficiary of expanded AI investment, a slowdown in data center investment poses a significant risk.
AMD (AMD)
It saw a sharp decline of approximately 17% on November 5th.
Given the high expectations for increased demand for AI semiconductors, a review of investment plans is a cause for concern.
Micron Technology (MU)
While demand for high-performance memory for AI servers supports growth, demand forecasts could be revised due to a slowdown in capital expenditure.
Data Center-related and Neo-Cloud Companies
Operators that purchase large quantities of GPUs and lease out their computing power are susceptible to impacts from both the burden of capital expenditure and future earnings.
Companies with high dependence on borrowed capital, in particular, require caution.
However, the AI industry itself is not coming to an end.
This is a very important point.
The growth of the AI industry and the rise in stock prices of AI-related companies are not the same thing.
Even if AI technology becomes widespread and brings significant benefits to society, it does not necessarily mean that the companies that invested to realize it will be able to recoup sufficient profits.
For example, even if a capital investment of 100 billion yen is made, if the profit generated from that investment is small, it cannot be called a good investment for shareholders.
Rather, if capital investment expansion has been excessive, curbing investment may lead to long-term improvements in profitability.
Furthermore, while stricter regulations work to the disadvantage of new entrants, they can sometimes work to the advantage of large companies that have already secured facilities and a customer base.
Moving forward, it is necessary to analyze the scale of capital investment, profit margins, capital recovery capabilities, and financial health individually, rather than evaluating AI-related stocks as a single group.
4. Impact on Japanese Stocks: Diverging Fortunes for the Nikkei 225 and TOPIX
A significant impact is already being seen on Japanese stocks as well.
The Nikkei 225 Stock Average on November 5, 2026, ended trading at
61,077.90 yen, down 1,110.73 yen (-1.79%) from the previous day
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On the other hand, the TOPIX rose to
3,940.39 points, up 1.16% from the previous day
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Why did the TOPIX rise while the Nikkei 225 fell sharply?
The answer lies in the impact of semiconductor-related stocks.
Because the Nikkei 225 is heavily influenced by fluctuations in high-priced stocks, the entire index tends to fall when specific AI and semiconductor stocks plummet.
Meanwhile, the TOPIX is an index based on market capitalization and reflects the price movements of a broader range of companies.
In other words, not all Japanese stocks were being sold off.
In fact, on the Tokyo Stock Exchange Prime Market on November 5, the number of advancing stocks significantly exceeded the number of declining stocks.
From this, we can infer the possibility that investment funds previously concentrated in AI and semiconductor-related stocks are shifting to other sectors.
Impact on Japanese semiconductor-related stocks
The following companies are worth noting.
Advantest (6857)
A major company in semiconductor testing equipment. As the growing demand for high-performance semiconductors for AI has supported its performance, it is a stock sensitive to concerns about a slowdown in capital investment.
Tokyo Electron (8035)
A global company in semiconductor manufacturing equipment. Changes in the capital investment plans of semiconductor manufacturers could affect its orders.
Kioxia Holdings (285A)
A semiconductor memory-related company. While expectations for demand from AI servers are high, caution is needed regarding changes in demand forecasts and memory market conditions.
SoftBank Group (9984)
Through its investments in AI-related companies and its business strategy, it is susceptible to changes in the valuation of the overall AI market.
This does not mean that these companies cannot grow in the long term.
However, future profit growth may already be priced into their stock prices.
Therefore, even if their performance is growing, if it falls short of market expectations, their stock prices will decline.
On the other hand, Japanese stocks that may benefit include:
1. Domestic consumption-related stocks: Aeon (8267), Seven & i Holdings (3382), etc.
2. Real estate-related stocks: Mitsui Fudosan (8801), Mitsubishi Estate (8802), etc.
3. Renewable energy-related stocks: Renova (9519), etc.
4. Defensive stocks: Telecommunications, food, daily necessities, etc.
5. Defense-related stocks: Mitsubishi Heavy Industries (7011), Kawasaki Heavy Industries (7012), IHI (7013), etc.
However, these stocks will not necessarily rise uniformly.
For example, real estate stocks are vulnerable to rising interest rates, and renewable energy stocks are also affected by subsidies and financing costs.
Regarding defense-related stocks, a reduction in the US defense budget will not necessarily be a tailwind for Japanese companies.
In addition to the results of this election, it is important to check the performance of Japanese companies themselves and domestic policies.
5. Impact on Exchange Rates—Will the Dollar-Yen Head Toward a Stronger Yen?
The results of this midterm election are also affecting the dollar-yen exchange rate.
In the foreign exchange market on November 5, the yen temporarily strengthened to the 157 yen level against the dollar.
There are mainly three reasons for this movement.
1. Decline in US interest rates
If the view spreads that large-scale fiscal spending and tax cut policies will become difficult to realize due to a divided Congress, market expectations regarding future fiscal deficits and government bond issuance will change.
If US Treasury yields fall, the attractiveness of holding dollars will relatively decrease, which could lead to a weaker dollar and a stronger yen.
2. Bank of Japan’s monetary policy
If the Bank of Japan continues to raise interest rates while US interest rates fall, the interest rate gap between Japan and the US will narrow.
This generally acts as a factor for a stronger yen.
However, inflationary pressure remains in the US, and it is not certain that the Fed will necessarily move toward interest rate cuts.
3. Global investor risk aversion
If a sharp drop in AI-related stocks leads to a global stock market decline, investors may reduce their holdings, potentially strengthening the movement to buy back the yen.
On the other hand, if global financial instability intensifies, there are cases where the dollar itself is bought as a safe-haven asset.
Therefore, a stock market decline does not necessarily mean a stronger yen.
Dollar-yen forecast for the next 1 to 3 months
Starting from the current 157-158 yen level, I am considering the following three scenarios.
Scenario 1: If the yen continues to strengthen
Expected level: 150-155 yen
If US interest rates fall, the Bank of Japan raises rates further, and the correction in AI-related stocks continues, there is a possibility that upward pressure on the yen will strengthen.
Scenario 2: A trendless development
Expected level: 155-160 yen
If US interest rates remain high and political uncertainty persists, but the economy does not deteriorate significantly, a development where the rate fluctuates within a certain range is also conceivable.
Scenario 3: If the yen weakens again
Expected level: Over 160 yen
If the situation in Iran becomes tense again, crude oil prices rise, and interest rates remain high due to concerns about US inflation, there is a possibility that dollar-buying pressure will strengthen.
Since Japan is an energy importer, the deterioration of terms of trade due to high crude oil prices could also be a burden on the yen.
*The above is my scenario analysis assuming economic conditions, and is not a target price calculated by a statistical model.
At this stage, I am mindful of the risk of a stronger yen if US interest rates fall further.
However, the dollar-yen exchange rate is not determined solely by the results of the midterm elections.
Going forward, the Fed, the Bank of Japan, US price indicators, and crude oil prices will be important factors for judgment.
6. Impact on crude oil prices—Will the Iran war end?
Along with AI-related stocks, crude oil prices are important in the results of this election.
It is reported that the background to the Republican Party’s crushing defeat in the midterm elections was public dissatisfaction with the war with Iran, high gasoline prices, and rising living costs.
For President Trump, continuing his previous diplomatic and military policies may become politically difficult.
Immediately after the election, expectations for the reduction and end of the war rose, and crude oil prices fell significantly.
WTI crude oil futures fell to the $88 per barrel range on November 4.
However, on the following day, the 5th, crude oil prices rebounded against the backdrop of uncertainty in the Middle East situation.
In other words, it is not certain that the war has ended.
This is a point that requires caution.
If crude oil prices fall, it will be a major benefit for Japan.
Japan relies on imports for most of its crude oil and natural gas.
If crude oil prices fall, the following benefits can be expected:
1. Lower gasoline prices
2. Downward pressure on electricity and gas rates
3. Reduced fuel costs for airlines
4. Cost reductions for transportation and logistics companies
5. Lower production costs for manufacturers
6. Improvement in household real purchasing power
7. Improvement in corporate earnings
In particular, there could be a positive impact on airlines, land transport companies, chemical companies, and domestic consumer-related businesses.
On the other hand, it may also be a headwind for the earnings of crude oil development companies and oil-related firms.
Also, if the drop in oil prices is caused by a sharp deterioration in the global economy, it is not necessarily good news for the stock market as a whole.
The important point is why crude oil is falling.
7. What will happen to Trump’s tariffs? What is the biggest change for Japanese companies?
Among President Trump’s policies, it is the tariff policy that has had a major impact on Japanese companies.
This time, with the Democratic Party controlling both houses of Congress, oversight of the Trump administration’s policy management will intensify.
However, tariffs will not be automatically abolished.
This is because the President retains certain tariff authority based on trade law.
In February 2026, the US Supreme Court invalidated tariffs based on emergency powers, but the administration is proceeding with tariff policies using other legal grounds.
There is a possibility that additional tariffs or changes will continue to be implemented.
Impact on Japanese Companies
Automotive Industry
Toyota Motor (7203), Honda (7267), SUBARU (7270), and others will be affected by trends in the US market and tariff policies.
If the risk of additional tariffs decreases, it will be a tailwind for corporate earnings.
Electronic Components and Machinery-related
For companies with high exports to the US, a decrease in tariff uncertainty will make it easier to plan capital investment and production.
However, if US-China tensions continue, risks through Chinese operations and supply chains will remain.
What I am focusing on is the point that while extreme changes in tariff policy are being suppressed by political opposition, trade measures based on presidential authority remain.
In other words, we should consider that tariff risk is not disappearing, but rather that the way tariff policies are implemented may change.
8. Impact on US Interest Rates, Government Bonds, Gold, and Bitcoin
Beyond the stock market, these midterm elections will affect a wide range of financial products.
US Government Bonds
Expectations that the expansion of fiscal spending will be curbed could lead to buying of US government bonds and a decline in yields.
On the other hand, if the conflict between the Democratic and Republican parties intensifies, raising concerns about the debt ceiling or government shutdowns, there is also a risk that interest rates will rise due to market turmoil.
It cannot be said that this is a one-sided positive factor for US government bonds.
Gold
Political uncertainty, a sharp drop in stock prices, and a decline in real interest rates are factors that will drive up gold prices.
In fact, gold prices rose on November 5.
However, since gold prices are also in a high range, there is a possibility of a temporary decline due to liquidation sales during stock market plunges or a stronger dollar.
Bitcoin
Bitcoin is significantly influenced not only by changes in regulatory policy but also by the risk appetite of global investors.
In the market on November 5, Bitcoin also fell significantly.
While a retreat in expectations for crypto-friendly policies could be a headwind, actual price fluctuations are also heavily related to capital inflows, leveraged trading, and the interest rate environment.
Therefore, it is premature to predict a long-term decline solely based on a Democratic victory.
9. Impact on the Defense Industry, Ukraine, and China
This election will also have a major impact on international politics.
Defense Industry
The significant expansion of the defense budget envisioned by the Trump administration may become difficult to coordinate with Congress.
On the other hand, there is a possibility that moves to demand increased defense spending from Japan and Europe will continue.
Therefore, it is conceivable that US defense-related stocks and Japanese defense-related stocks may show different price reactions.
Ukraine Situation
Many Democratic lawmakers are active in supporting Ukraine, and support policies in Congress may be strengthened.
However, because of issues regarding presidential authority and budget execution, it is not guaranteed that military support will expand significantly just because the Democrats control Congress.
Relations with China
The AI hegemony competition between the US and China will not easily end due to the results of this election.
There is a certain consensus between the Democratic and Republican parties in areas such as advanced semiconductors, AI technology, export controls, and national security.
Therefore, just because US AI-related regulations are strengthened, it does not necessarily mean that it will be entirely advantageous for Chinese semiconductor companies.
Rather, it will be important how the US balances regulation and industrial development to maintain its competitiveness in the AI sector.
10. How to predict future US and Japanese stocks?
From here on, this is my scenario analysis assuming the next 1 to 3 months.
Rather than pinning down the direction of the entire market to one outcome, I would like to consider it by dividing it into three cases.
Scenario 1: Political turmoil settles down and stock prices recover
This is a case where AI regulation does not become as strict as the market fears, and data center construction continues.
Furthermore, if crude oil prices stabilize due to the de-escalation of the war in Iran, inflationary pressure will decrease, which will also be a tailwind for corporate earnings.
In this case, US stocks may recover after an adjustment, and there is a possibility that buying back of semiconductor-related stocks will also progress in Japanese stocks.
Sectors to watch: AI services, major technology, domestic consumption, automobiles, and aviation.
Scenario 2: AI stocks continue to adjust, but the stock market as a whole remains firm
This is a case where investment funds for AI-related stocks decrease, while funds flow into other sectors.
The price movements of the Nikkei Stock Average and TOPIX this time will be important material for considering this scenario.
For example, even if semiconductor-related stocks fall, if domestic consumption, finance, real estate, and high-performing manufacturing industries rise, the decline of the market as a whole can be suppressed to some extent.
Sectors to watch: Domestic demand, daily necessities, large-cap stocks with strong financial foundations, and high-performing value stocks.
At this stage, I am paying particular attention to this polarization scenario.
Scenario 3: A reduction in AI capital investment leads to a global stock market decline
This is the case I want to be most cautious about.
New data center construction will decrease significantly, and semiconductor manufacturers’ earnings forecasts will be revised downward.
Furthermore, if the financial problems of companies that were financing huge AI capital investments with debt come to light, it could also affect the credit market.
If this happens, selling could spread not only to AI-related stocks but also to financial institutions, capital investment-related stocks, and cyclical stocks.
It cannot be denied that a correction in US stocks could spread to Japanese and European stocks, leading to a global risk-off phase.
In this scenario, it is necessary to prioritize capital management over simple dip-buying.
11. What will happen to ETFs like NASDAQ 100 and QTEC?
When investing in the NASDAQ 100 or technology-related ETFs, the results of this election are extremely important.
The NASDAQ 100, in particular, is susceptible to the influence of large-cap technology companies, and a correction in AI-related stocks could spread to the entire index.
On the other hand, QTEC is not an ETF that tracks the NASDAQ 100 index itself.
QTEC is an ETF that targets the technology sector within the NASDAQ 100 components and adopts an equal-weighted methodology.
Therefore, its price movement differs from market-cap-weighted NASDAQ 100-related ETFs.
In a situation like this, where semiconductor and technology-related stocks are being sold off broadly, even an equal-weighted ETF carries a significant risk of a sharp decline.
Things to consider for future ETF investing
1. Do not increase your holdings simply because the price has fallen.
2. Confirm whether the correction in the AI semiconductor sector is continuing.
3. Compare the price movements of the overall NASDAQ 100 with the semiconductor stock index.
4. When investing in installments, decide in advance on the limit of funds available for additional investment.
5. Clearly separate and manage short-term trading and long-term holdings.
6. For strategies involving stop-losses, determine stop orders and position sizes in advance.
I particularly emphasize the point that even in industries expected to grow in the long term, it is entirely possible for stock prices to fall significantly in a short period of time.
This is because believing in the future potential of AI and judging that the current stock price is undervalued are two separate issues.
12. Five key indicators investors should check going forward
After this midterm election, following political news alone will not be enough.
It is necessary to confirm the actual impact on stock prices.
1. Philadelphia Semiconductor Index (SOX)
Check whether capital inflows into AI-related stocks are recovering.
2. Relative strength of the NASDAQ 100 and S&P 500
If only the NASDAQ 100 is weak, there is a possibility that capital is shifting from high-tech stocks to other sectors.
3. US 10-Year Treasury Yield
Determine whether the decline in interest rates is supporting stock prices or reflecting caution regarding economic deterioration.
4. Dollar-Yen Exchange Rate
If the yen strengthens and the dollar weakens, pay attention to the impact on Japanese export-related companies.
5. Crude Oil Prices
These are important indicators for considering the future of the Iran war, inflation, monetary policy, and corporate earnings.
In addition to these, I also want to check the capital investment plans and earnings forecasts announced by major AI companies.
This is because I believe that whether corporate capital investment and profit forecasts actually change will influence stock prices in the medium to long term, rather than the election results themselves.
13. Conclusion: Is Trump’s defeat bad news for Japanese and US stocks?
This midterm election has become a major turning point that changes the US political system.
However, Trump’s defeat does not mean it will be one-sidedly bad news for the financial markets.
A divided Congress curbing extreme policies could work positively for the market.
Falling crude oil prices, easing inflationary pressure, and reduced uncertainty in trade policy could become supporting factors for the US and Japanese economies.
On the other hand, for AI and semiconductor-related stocks, it is possible that we have entered a critical phase where growth expectations to date will be revised.
What should be noted in particular is that even if AI demand itself is increasing, if excessive investment in data centers is re-evaluated, the stock prices of semiconductor and equipment-related companies could fall.
Based on the results of this election, I have the following thoughts regarding the future investment environment.
US Stocks: Policy stabilization is a positive factor, but caution is needed regarding corrections in AI-related stocks.
Japanese Stocks: There is a possibility of increasing polarization between AI/semiconductor-related stocks and other sectors.
Dollar-Yen: If US interest rates continue to fall, the yen will likely strengthen. However, depending on crude oil prices and the Federal Reserve’s monetary policy, there is a possibility of a return to a weaker yen.
Crude Oil: Expectations for a de-escalation in the situation in Iran are a downward factor. However, the risk of the war continuing or re-intensifying remains.
Gold: Political uncertainty and falling interest rates could serve as support factors.
Defense-related: Individual analysis is necessary as the impact of policies and budgets differs between the US and Japan.
And what I consider most important is the future investment stance toward the AI industry.
Until now, the market has significantly pushed up the stock prices of semiconductor-related companies against the backdrop of expectations that the AI industry would grow rapidly.
However, from now on, not only the growth rate, but how much of the invested capital can be recovered and how much profit can ultimately be generated—the essential aspects of corporate management—will become more important.
Mr. Trump’s defeat this time is not just a political event.
It could be the trigger for a reassessment of investment funds that had been concentrated in AI-related stocks, leading to a change in investment targets in global financial markets.
Of course, if regulations do not become stricter and AI capital investment continues, there is a strong possibility that this sharp drop will end up being a temporary correction.
Therefore, it is important not to judge buying and selling based solely on political news, but to confirm the implementation status of policies, corporate earnings, interest rates, and actual stock price trends.
In the coming market, I believe it will be more important than ever to discern not just ‘what will grow,’ but ‘which companies will be able to profit from that growth.’
Reference Materials
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Associated Press (November 4-5, 2026): US Midterm Election Results, US Stock Market Trends
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Reuters (November 4-5, 2026): AI Data Center Regulations, US Stocks, Crude Oil, Currency Markets
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Nomura Asset Management (November 5, 2026) ‘On Future Market Trends Following the US Midterm Elections’
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Nomura Securities (November 5, 2026) ‘Nikkei Stock Average Hits 5.5-Month Low: Will the Headwinds for AI Stocks Continue Following the Democratic Landslide?’
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Tokyo Stock Exchange related market data, closing prices as of November 5, 2026
*Actual stock prices and index values are based on information from each market up to November 5, 2026. Future price levels are conditional scenarios and are not definitive predictions.