The Risks State and Local Elections Pose for Wall Street and the AI Trade
Investors are watching races in key states for pushback against the AI infrastructure build-out.
Wall Street investors are closely watching state and local elections, particularly in Texas, Ohio and Georgia, as the outcomes could significantly impact AI and data-center projects. Governors in these states are seen as "on the front lines of AI/data center regulation," according to RBC Capital Markets analysts. Should Democrats win the governorships in Georgia and Nevada, which are currently held by Republicans, it could pose risks to the AI trade.
In Texas, where 13.3 gigawatts of AI projects are projected to come online by 2030, a Democratic governor's moratorium on data centers could jeopardize these investments.
The uncertainty surrounding state policies on data centers is making investors nervous about AI-related stocks, contributing to the tech selloff and causing the Nasdaq composite to slump 1.1%. Common AI-related stocks, such as Oracle, Intel and Advanced Micro Devices, have all seen declines. Companies from Oracle to private-asset manager Blue Owl and land owner Crusoe are heavily involved in the AI build-out in Texas, making investors cautious about financing the infrastructure.
Debt sales by AI-related companies have also been put on hold due to the election uncertainty, as their bankers urge them to wait for greater clarity on the regulatory outlook. However, some analysts argue that new curbs on data centers will likely just shift development between states rather than slow the overall build-out. Federal policies are unlikely to be implemented due to Trump's stance against limiting AI expansion and the Democrats' inability to achieve a veto-proof majority in Congress.
Investors are bracing for short-term volatility, with options traders positioning for a 1% swing in the S&P 500 on Nov. 4, the day after the election. Some investors are using prediction markets to gauge the outcome, and if active, they may take advantage of price differences across venues. Around 21% of individual investors surveyed by Schwab reported that the political landscape in D.C. is their top concern, surpassing worries about an AI bubble or inflation.
However, those who let their personal political preferences cloud their investment decisions may end up losing in the long run.
Written by urgent.news from Hindustan Times - World News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
