U.S. investors weigh election risks to AI data center buildout

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AI data center election risks

Highlights

AI data center and infrastructure spending is expected to exceed $1 trillion in 2025, driving equity valuations but raising regulatory and political risks.
Prediction markets Kalshi and Polymarket see a Democratic sweep of Congress as the biggest potential risk for AI buildout, given 69% of Democratic voters favor data center limits versus 43% of Republicans.
Investors focus on state and local races in Texas, and gubernatorial elections in Ohio, Pennsylvania, Georgia, Nevada, Wisconsin and Michigan, as these authorities directly influence data center project approvals and timelines.

Election scrutiny clouds AI infrastructure outlook

As reported by Reuters, investors are growing more sensitive to political and regulatory risks around data centers as AI-related capital spending becomes a major driver of equity valuations. Companies such as Alphabet and Amazon are pouring money into the infrastructure, and spending on data centers and other AI facilities is expected to top $1 trillion next year, supporting profit expectations across the sector.

Market participants say public backlash is becoming a more tangible obstacle as communities raise concerns about environmental strain, electricity costs and the broader effects of the technology. Christopher Gannatti, U.S. chief investment officer at WisdomTree, said markets have closely tracked how much a small group of large companies is spending on data centers since ChatGPT launched in November 2022.

Investors have largely priced in a strong expansion path for AI, making the sector vulnerable to any signs that development could slow. Some AI-linked segments have already stumbled in recent weeks amid debt concerns focused on cloud company CoreWeave.

Analysts say Democratic victories in both chambers in the November 3 elections would present the biggest potential risk for the AI trade among likely midterm outcomes. Prediction markets Kalshi and Polymarket currently indicate that a Democratic sweep of the Senate and House of Representatives is the most likely result, although strategists remain skeptical that any national legislation significantly curbing data center construction would become law.

State races and oversight remain key market focus

Even if Washington does not produce sweeping restrictions, investors expect a Congress controlled by Democrats to hold more hearings and investigations into AI and the data center rollout. Matt Gertken, chief geopolitical strategist at BCA Research, said any bill likely to win President Donald Trump’s support would regulate AI without sharply hitting capital expenditure or construction.

Polling suggests opposition to data center expansion is stronger among Democrats than Republicans. A Reuters/Ipsos poll released this month found that 69% of Democratic registered voters support limits on building data centers, compared with 43% of Republicans, though concern is present in both parties.

State and local contests may prove even more important because those authorities directly influence project approvals and development speed. Investors are tracking races in states including Texas, while Morgan Stanley strategists are also monitoring gubernatorial elections in Ohio, Pennsylvania, Georgia, Nevada, Wisconsin and Michigan.

Brian Gardner, chief Washington policy strategist at Stifel, said added hearings and investigations could generate negative headlines and raise volatility. Kevin Shea, senior equity analyst at BNY Wealth, said policy uncertainty is unlikely to derail the broader AI investment theme, but it could disrupt project timing and raise costs.

In our earlier article on the U.S. AI data center boom, we explained that the rapid buildout is running into higher financing costs, construction delays and tighter power availability, which is starting to test investor confidence. We also noted that only a limited share of planned projects looked realistic, while examples such as CoreWeave’s sell-off and cost overruns on major builds highlighted how funding pressure and community pushback could slow capacity expansion.

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