1-0 Humankind Midterms Vote: AI and Datacentres Take a Hit
Voters passed dozens of measures limiting datacentre expansion in last week's US midterms, and analysts say the result could accelerate a market rethink of the AI boom. Capital Economics called the vote a possible catalyst for a lasting unwind of AI equity gains.
US voters in last week's midterm elections passed dozens of measures calling for limits on datacentre expansion, a result some analysts see as a 1-0 humankind midterms vote against unchecked AI growth and a possible trigger for a market rethink.
The Democrats won a wave of seats. Their gains were driven largely by a cost-of-living squeeze that followed President Donald Trump's war in Iran, according to a Guardian analysis published November 8. But AI was on the ballot too, in many places literally.
Opposition to the power-hungry datacentres became a rallying cry elsewhere. At a campaign event, Texas senator-elect James Talarico recalled meeting a mother who told him the lights from a neighboring datacentre were so bright her son thought it was daytime in the middle of the night.
Market impact
The results may puncture one story that has sustained the AI market boom. That story involves carpeting the US in debt-funded datacentres, which would become necessary and viable as demand for the technology grows.
Joe Maher of Capital Economics said sentiment toward the AI trade "was already looking fragile and the US equity market was showing many late-cycle signs." He added that the midterms "could plausibly become the catalyst that leads to a more long-lasting unwind of the AI equity boom."
It is not yet clear whether the tech sell-off will resume this week. Analysts expect the opposition, at the least, to slow the pace of investment in AI's physical infrastructure.
Voter frustration
Critics point to several downsides alongside the benefits many people get from chatbots. They include a flood of low-quality online content and tech firms pushing AI into every app, platform and device.
Voters have also watched the leaders of big tech firms grow extremely rich while consumers face inflation. Elon Musk poured hundreds of millions of dollars into Texas in an attempt to sway the electorate. That spending became a selling point for Democrats.
Economist Dario Perkins of TS Lombard has argued that AI can bring welcome productivity gains, but not big enough to justify current market valuations.
Whether the objections to datacentres signal a broader shift that could rein in the tech companies is an open question. Some compare it to the early 20th-century breakup of the oil and railway monopolies.
