Allianz says AI investment wave to continue after US midterms
Allianz chief economist Christian Schulz says the artificial-intelligence investment wave will persist despite the Democratic Party gaining control of both houses of Congress in the US midterm elections. He cautions against overinterpreting market reactions, noting some projects may face delays or r
The US midterm elections saw the Republican Party, led by President Donald Trump, lose ground, with the Democratic Party taking control of both the House of Representatives and the Senate. The result has drawn market attention, particularly after some Democratic lawmakers proposed tightening regulations on artificial-intelligence-related infrastructure.
Christian Schulz, chief economist at Allianz Investment, argued that the wave of AI investment will continue. He warned against overinterpreting the current market reaction, saying that while some projects may be delayed or have their locations adjusted, there will be no long-term impact on US AI infrastructure. The industry's bottleneck remains factors such as chip restrictions, he added.
Allianz stressed that although companies are issuing large amounts of debt to invest in AI, overall leverage ratios remain relatively low and their financial positions are sound, meaning the risks are manageable. The firm forecasts that US corporate earnings will grow by about 16 per cent next year. However, given high valuations and rising bond yields, overall returns are expected to become more moderate, and investors should push for diversified portfolios.
Schulz also noted that the midterm elections have triggered a major political shock, but he believes the impact on policy will be very limited. In particular, Trump holds veto power over legislation. Even if Democratic lawmakers seek to advance new bills, the process could take months and may ultimately be vetoed. He estimated that US tariffs will remain high, the conflict with Iran is unlikely to end soon, and oil prices will stay elevated.
He said that in the new congressional term, the likelihood of increased defence spending and large-scale debt issuance has diminished, reducing fiscal risks. This could push US Treasury yields lower in the short term. However, with a strong economy and the continued AI investment wave, bond investors will continue to seek higher returns, and bond yields will eventually rise.