The Democratic sweep is getting a split reaction on Wall Street, where investors are embracing the prospect of divided government even as results in Texas and other key states threatened to upend the artificial-intelligence trade that has powered markets all year.

President Trump’s remarks to news outlets that he will work with Democrats were welcomed by investors. Still, the natural gridlock that often occurs when different parties are in charge of the White House and Congress can reassure those worried about runaway spending in Washington.

“I also think equity investors are breathing some kind of relief that the president is going to accept the results,” said Ron Albahary, chief investment officer of multifamily office LNW.

While markets tend to prefer political gridlock, Albahary isn’t counting out the possibility that a lame-duck president could look to cut bipartisan deals with Democrats in Congress to burnish his legacy.

“One risk would be AI regulation reining in the AI build-out at the federal level,” he said.

Already, Democratic wins in gubernatorial races in five states key to data-center development now threaten to slow the pace of new construction. In Texas, Ohio and elsewhere, the focus now shifts further toward what those projects mean for nearby power costs, water usage and more—and away from the arms race among AI’s hyperscalers, and between the U.S. and China.

“Data centers in space looking pretty appealing right now,” Elon Musk wrote in an early Wednesday post on X, his social-media platform. By midmorning, shares of SpaceX, Musk’s rocketry and AI company, had slumped by more than 4%. Tesla, his electric-car company, also fell.

Some of the AI trade’s more-speculative stocks, including Coreweave, also fell, as did power producers like NRG Energy and other suppliers for the construction boom. Nvidia traded in the red.

The S&P 500 and Nasdaq composite each opened more than 1% higher. The Dow Jones Industrial Average jumped more than 2%, or 1100 points.

In Texas, home to roughly a quarter of the U.S. data-center capacity that is expected to come online by 2030, an upset win by Democratic Regina Hinojosa for the governor’s office drew the most attention. She had called for an immediate moratorium for data centers until lawmakers find a way to give communities a seat at the table, in a state where companies ranging from Oracle to landowner Crusoe plan large-scale developments.

Democrat Keisha Lance Bottoms, a supporter of a data-center pause, won the Georgia governor’s race. Amy Acton, who backs a “conditional moratorium,” was declared the winner in Ohio’s top job. Voters in the Buckeye state also delivered a string of defeats to the AI trade in local referendums on specific data center projects there.

“In a world where the AI boom is everything, the implications are enormous,” said Bob Elliott, chief executive at Unlimited Funds. “The election is a warning call for an industry that has largely built on expectations of unchecked growth ahead.”More broadly, investors opened the new era in Washington with hopes Congress would revert to its traditional role as a check on presidential power. The Democrats’ sweep is likely to stymie major legislative actions for the remainder of Trump’s term and increase the pressure on the White House to end the war in Iran and its disputes with trading partners.

Defense contractors RTX, Lockheed Martin and Northrop Grumman fell. A divided government could make it harder to approve military spending.

Trump still has significant power to jolt markets through renewed military campaigns against Tehran and tariff policy on certain industries—especially before Democrats are sworn in. “Several of the administration’s priorities, including trade, immigration, foreign policy, and deregulation, can be pursued or influenced largely through executive authority,” Glenmede analysts told clients Tuesday.

Government bonds yields ticked lower Wednesday, with the 10-year Treasury yield dropping to 4.92% from 4.95% a day earlier. The blue wave lifted shares across industries expected to benefit from Democrats’ return to power.

Turbine makers Vestas and Nordex, offshore-wind company Orsted and solar-power names including First Solar, OCI Holdings and SMA Solar all jumped on hopes the Democratic wave will counter Trump administration policies that have battered renewable energy firms.

Healthcare also received an early boost. Stocks such as Centene, HCA Healthcare and Universal Health rose in early trading. A Democratic Congress will have more leverage to strike a deal with President Trump to boost spending on Obamacare.

One big loser after Tuesday’s result: The president’s social-media firm, Trump Media, which has often traded in tandem with his political fortunes. Shares fell sharply after the open Wednesday, putting them on pace for an all-time low.