Expert reveals why stock market plummeted after midterm elections and it's not all because of Democrats

US stocks plunged on November 5 after the landmark Democratic win at the midterm elections, but that's not the full picture of they have been falling fast.

November 3 was a fine day for the Democrats, as the party's popularity swept the country, and in the end, the party took control of both the House and the Senate.

With many states voting Blue, it's not a great outlook for Trump, who still has two years of presidency left.

With Congress no longer Republican, theories that Trump could face another impeachment attempt has been circling online – but the ramifications of a Blue US has already been seen and it's not at the White House level just yet.

Instead, Wall Street took a hit as part of a three-tiered fear that investors have, according to an expert.

Stocks fell after the midterm results (Photo by TIMOTHY A. CLARY / AFP via Getty Images)

Adam Patti, CEO of VistaShares, said investors are seeing three concerns at once, which includes the uncertain political landscape, but also their potential returns on investment and then the implication of AI being used in trading.

This comes as investors seemed to dump out their AI stocks after the midterm results, with NBC reporting fears over stricter AI regulations being to blame.

"The first is political: the midterm results, including wins in several key data center states, raised fears that the buildout will face more regulation, slower permitting and pushback over power bills," Patti said, per Fox Business.

"The second is return on investment, with investors asking how long hyperscalers can keep spending at this pace while free cash flow goes negative. The third is positioning," he added, before noting: "Semiconductors were the most crowded trade in the market, and crowded trades unwind violently."

With an election result that could see some investors face risks if the regulatory landscape changes, dumping their stocks was the safest option for them during a time of uncertainty.

However, there's also the case of those potentially losing investment if they also backed Republican candidates (like Elon Musk), and along with AI complicating stocks and trades, Patti said it's a tough time on the market – which leads to people hedging their bets elsewhere.

One person who faced the aftermath of states voting Blue was Musk, who poured $446m (£330 million) into supporting the Republican Party, only for 19 0f the 106 candidates he backed, winning their seats.

The results by November 4 (Photo by Yasin Demirci/Anadolu via Getty Images)

Musk took to X on November 4 after the results were made public, seemingly taking aim at his investment loss as he wrote: "Guess my election-interfering space lasers didn’t work this time [shrug emoji]."

One user said: "446 MILLION DOLLARS DOWN THE DRAIN LIL PUP."

A second wrote: "By space lasers you mean 100s of millions of dollars.Americans voted against MAGA and the billionaire class."

Sharing his 'biggest concerns' about a Democratic majority, Musk urged Americans to vote for Republicans, because he said if not, Democrats would:

1. "Make DC and Puerto Rico states to gain a strong majority in the Senate.
2. Open the borders and legalize everyone living in America illegally to cement a permanent majority.
3. Increase the size of the Supreme Court to gain an immediate majority.
4. This would result in America becoming a permanent one-party state and the end of democracy in any meaningful sense of the word."

He added of his prediction: "All that is needed to ensure this doesn’t happen is 51 Republican senators in 2029. That is why you should vote for Republican senators this election. Other reasons are irrelevant compared to this one."