Will Democrats stop Trump's 'flourishing' AI and data centre policies?

Democrats are considering potential policy changes to the AI and data centre sector, as their victory in the midterm elections has raised questions about the current trajectory. President Donald Trump has pushed for policies that prioritize free speech and human flourishing in the AI sector, often boasting about the resulting trillions of dollars in investments.

However, polls indicate American voters are growing concerned about the environmental impact, high costs, and potential distraction from more pressing issues like inflation and the war in Iran.

Michael Strobaek, global chief investment officer of Lombard Odier, suggests Democrats may scale back tax incentives, shift grid costs onto developers, and introduce safety regulations. However, the final two years of Trump's administration will face challenges, with his veto power likely preventing any federal moratorium on data centres. Congress is more likely to increase oversight and legislative gridlock, rather than immediately reversing existing policies.

The stock market could face pressure from AI-linked shares in the interim, but higher yields may offer some support. Historically, US equities tend to perform better a year after midterms, though volatility is more likely than a clear trend. Greater regulatory scrutiny could weigh on capital expenditures and dollar inflows, but monetary policy and the AI investment cycle remain key drivers of the US dollar in the near term.