On Wednesday, most energy stocks tumbled significantly—except for the clean energy and utilities stocks in a few still-stable “red states”—due to the market's optimism regarding peace negotiations over the Iran war after the Democratic Party's “blue wave” victory in the midterms, as well as pessimism about the data center boom, which together pushed crude oil prices to a one-month low.
While Wall Street cheered at the expected deadlock due to the split between Congress and the White House – with the Dow Jones Industrial Average rising 3% on Wednesday – most energy companies saw the opposite trend, especially in states where Democratic victories were the most surprising, such as Texas.
Another possible loser is a bipartisan legislation aimed at accelerating energy project construction and providing power for the artificial intelligence boom. This bill will benefit both renewable energy and oil and gas pipelines. Democrats, who are opposed to fossil fuels, may now be more motivated to adopt a tougher negotiating strategy. Analysts have lowered the probability of the Bipartisan America Affordability and Employment Act (HJR-5) passing during the lame duck session before the new Congress takes office from 40% to 25%.
The executive director of the non-profit organization PowerLines, Charles Hua, stated that from congressional elections to governor elections to public utility commissions, this “shocking” blue wave represents a referendum by voters on soaring electricity and gasoline prices, as well as the chain reaction of inflation it has triggered throughout the economy.
Hua said to Fortune: "It is only when certain things are fundamentally unstable that political outcomes can experience such strong fluctuations, and I believe one of the main manifestations of this is energy costs."
In addition to voters' dissatisfaction with the war in Iran and fuel prices, there were more than 40 local voting proposals that involved restrictions or regulation of data centers. All of them were passed, except for one in North Dakota. Hua said, "This is an astonishing statistic."
Judging from the performance on Wall Street, there are clear winners and losers among utility companies and independent power generators.
NRG Energy and Vistra are expanding their gas power generation in Texas to help meet the electricity demand brought about by the artificial intelligence boom, but the stock prices of both companies have plummeted by 12% and 15% respectively. Gas turbine manufacturer GE Vernova has seen a 10% decline in its stock price.
Jefferies Analyst Julien Dumoulin - Smith specifically mentioned the "Texas shock" and pointed out: "The most influential surprise is the extent to which Texas voting shifted towards the Democratic Party, which threatens the prospects for data center development."
Tesla and SpaceX, headquartered in Texas, whose person in charge is Elon Musk, posted on X after previously failing to invest hundreds of millions of dollars in Republican candidates, saying: "It now seems that data centers in space are quite attractive."
On the other hand, public utility companies operating in Florida, which still remain Republican-controlled, were rewarded. The stock of NextEra Energy, headquartered in Florida, rose by 5%, and that of Duke Energy rose by 3%.
As more Democrats supportive of clean energy come to power, renewable energy companies have also seen a boost. First Solar has risen by over 4%, and solar component manufacturer Nextpower has soared by 13%.
After President Trump downplayed the possibility of an escalation in the Iran situation, while Vice President JD Vance blamed his party's electoral defeat on this war, the global benchmark price for crude oil fell by 8%, dropping below $100 per barrel for the first time in nearly a month. As a result, oil producers and refiners are also under pressure on Wall Street.
ExxonMobil and Chevron fell by 4% and 5% respectively. Refiners Marathon Petroleum and Valero Energy, which recently reported record profits, tumbled by 9% and 7% respectively.
Oil price forecasters, Pickering Energy Partners, the founder of Dan Pickering consulting and research firm, stated: "We have experienced a referendum on inflation, high oil prices, and Trump's overall policies." He added, "It seems that Trump will face more resistance and less room for maneuver in how he wishes to handle the Iran conflict."
What will happen next?
Pickering warns that there may be optimism regarding peace negotiations in Iran, but it is very likely that this war is far from over.
There is currently no clear compromise in sight, and it is very likely that Trump will feel frustrated before January next year and choose to escalate the situation, which was also a prediction he made before the election.
Pickering said to Fortune: "I think the conflict in Iran will put the United States in a more complex situation. We have been looking for a way to withdraw, but we hope that this path out will not lead to chaos in the Middle East. I believe this issue may go beyond the elections themselves. Even if there are more Democrats, I don't think they would want a bad outcome for the Iranian crisis. Oil prices have indeed fallen, but they haven't collapsed yet."
In China, the focus of market attention will still be on the rebound in the data center sector and licensing reforms. The states with the greatest growth in data centers include Texas, Georgia, and Ohio, where Democratic challengers won the gubernatorial elections and pushed for proposals to suspend data center construction.
Hua said, "Suspending construction" is certainly a hot topic at the moment, but it's not yet clear whether these efforts mean a temporary halt or a complete opposition. "How high is the priority given to electricity? I suspect that, relative to data centers, electricity will still be one of the most concerning issues for these new governments."
To some extent, the craze for artificial intelligence has brought the two parties closer in their support for a "comprehensive energy solution." This is also why a bipartisan effort to accelerate various energy construction projects is taking shape. However, it is expected that the Democratic wave will lead more people to advocate for waiting until next year to propose a version that is less favorable to fossil fuel projects. Such efforts may carry risks, as they still require Trump's signature.
Dumoulin-Smith added, "As the Democrats hold a stronger position as we enter 2027, their motivation to accept the pipeline terms is even weaker, which will push the debate towards a narrower focus on clean energy transmission solutions, or possibly lead to no agreement at all."
The bill will promote the development of long-distance transmission lines, which are the most受益 from renewable energy sources. As a result, the stock price of top transmission developer Quanta Services fell by 12% on Wednesday.
The Democratic sponsor of the bill, Senator Sheldon Whitehouse from Rhode Island, urged her party to continue supporting this bill on Wednesday.
Whitehouse issued a statement to Fortune saying: 'Democrats won the election by focusing on affordability as their campaign theme, and this bill can reduce household costs and allow us to begin to fulfill our campaign promises. It's like a bird in our hands. It would be foolish of us not to take it.'
