Midterm elections could reshape policy and profits for defense, healthcare, crypto and AI firms
Analysts say a Democratic gain in Congress would give the party new oversight powers over major U.S. companies, while President Donald Trump would retain veto authority and control of key executive functions.
Washington’s role in the business models of several large U.S. companies means the upcoming midterm elections could alter the regulatory and fiscal landscape for sectors such as defense, healthcare, cryptocurrency and artificial intelligence. A Democratic win in either the House or the Senate would give the party committee authority and subpoena power, allowing it to request documents, compel testimony and hold executives in public hearings.
Senator Richard Blumenthal, the top Democrat on the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations, has already sought records related to donors that attended a White House event, while Representative Jamie Raskin has requested communications concerning tariff exclusions.
Analysts note that historically the S&P 500 has performed better after midterms when Congress is divided, but Morgan Stanley’s head of U.S. public policy research, Ariana Salvatore, cautioned that past patterns may not apply this cycle. "We don't think that blueprint holds up this time around, and we still see plenty of reasons to be constructive on the U.S. equity market," she said.
In healthcare, Medicaid accounts for roughly three-quarters of Molina Healthcare’s premium revenue. The 2025 tax-cut and spending law, dubbed the One Big Beautiful Bill, is projected to cut federal Medicaid spending by $911 billion through 2034. A Democratic-controlled chamber could use budget negotiations to push back on those cuts, which analysts say could help stabilize enrollment for Medicaid insurers and patient volumes for hospitals.
Defense contractors such as Lockheed Martin, which derives about 70 % of its sales from the U.S. government, could see funding decisions hinge on congressional approval of multiyear procurement agreements, including a framework for 850 F-35 fighter jets. While bipartisan support for China deterrence and nuclear modernization may protect core programs, a Democratic Congress might scrutinize spending tied to Iran and Israel while advocating for additional aid to Ukraine.
For cryptocurrency firms, the failure of the Senate to advance the Trump-backed Clarity Act left regulatory certainty in question. A Democratic gain could lead to stricter consumer safeguards and tighter oversight of stablecoins, though industry strategist Sam Stovall said the sector primarily seeks clear rules regardless of which party controls Congress.
Banking regulators are proposing a capital-rule overhaul that could reduce requirements for the largest banks by about 4.8 %, potentially freeing billions for lending. Senate control would influence future regulator appointments and the intensity of congressional hearings.
In artificial intelligence, the administration’s emphasis on rapid data-center construction has sparked public opposition, with a recent survey showing 63 % of voters against locating a data center within 10 miles of their homes. The House recently voted to require state regulators to consider grid-upgrade costs for large data centers, a measure that stalled in the Senate. Analysts suggest that any midterm outcome could affect the allocation of infrastructure costs for tech developers, though local and state decisions will also play a major role.
"You want to be a stock picker and not just ride the whole sector," Morgan Stanley’s Monica Guerra said, highlighting areas such as shipbuilding, autonomous systems and missile defense as potential winners under a Democratic Congress. "We think the election can have meaningful consequences, but on a highly localized basis," Salvatore added.