US midterms pose risks to AI data centre boom as public backlash grows
US midterm elections could disrupt AI-driven stock market gains as Democratic victories may slow data centre expansion. Public opposition, stronger among Democrats, and state-level races add uncertainty to the US$1 trillion AI infrastructure spending forecast for next year.
Public opposition to data centres may jolt the artificial-intelligence trade as the US midterm elections approach, with a strong Democratic showing potentially hampering the buildout that has lifted stocks, market watchers say.
AI has driven the US stock bull market that just marked its fourth anniversary, as companies such as Alphabet and Amazon pour money into building data centres. AI’s importance to the market makes investors highly sensitive to obstacles that could slow the development pace, with spending on data centres and other AI infrastructure expected to top US$1 trillion (HK$7.8 trillion) next year, boosting corporate profits.
Public backlash is one of those obstacles. As the massive data centres proliferate, many Americans are concerned about the strain on the environment and impact on energy costs, as well as about the technology itself. “This is and has become a very tangible issue,” said Christopher Gannatti, US chief investment officer at WisdomTree. Since the launch of ChatGPT in November 2022, he said, “the key signal for the market has been how much money are these five or six huge companies spending” on data centres.
Democratic victories in both chambers in the November 3 elections, which would wrest control of Congress from President Donald Trump’s Republican Party, pose the greatest AI-related threats of the potential midterm outcomes, market watchers say. A Democratic sweep of the Senate and House of Representatives is the most likely outcome, according to trading on prediction markets Kalshi and Polymarket. Analysts are dubious about prospects for national legislation that would significantly stall data centre construction. However, they say Democratic leadership would likely mean more hearings and investigations related to AI and the data centre buildout. “There will be congressional hearings. There will be investigations,” said Brian Gardner, chief Washington policy strategist at investment bank Stifel. “You never know where that stuff leads, and there can be negative headlines.”
Investors are also focused on state and local races where data centres have become pivotal issues. A Reuters/Ipsos poll released this month showed 69 per cent of Democratic registered voters back limits on building data centres, compared with 43 per cent of Republicans. Even with a Democratic sweep, analysts doubt a bill that significantly impedes data centre expansion would become law. Trump — who has been supportive of AI — would likely block such legislation, said Matt Gertken, chief geopolitical strategist at BCA Research. “The bill that is going to pass, and the bill that Trump is willing to sign, will be an AI regulation bill, but it probably won’t be slamming the brakes on capex and construction,” Gertken said.
Policy uncertainty around data centres is unlikely to “derail” the AI investment theme, said Kevin Shea, senior equity analyst at BNY Wealth. “But what it can do is disrupt the timing and the cost,” Shea said.