Will the midterm elections put the AI investment cycle to the test?
- What to look for
- This is useful for investors seeking to interpret the midterms from an AI investment perspective when adding nonfederal signals, such as gubernatorial and public utility commission elections, to their checklists.
- Why it matters
- You can understand how policy levers governing data center expansion are divided among federal, state, and local authorities; how sentiment toward AI infrastructure differs across election scenarios; and why AI safety regulation is likely to develop incrementally and in a fragmented manner.
AI summary
Morgan Stanley’s Ariana Salvatore divides the midterm elections’ impact on AI into two channels: opposition to data centers and AI safety and regulation. She says the elections will be an important catalyst for the former, but their outcome matters little for the latter. She explains that her base case is conditional expansion, subject to electricity costs, power grid investment, siting, water use, and community impacts, and that she does not expect a blanket halt at the federal level. She says the practical levers for delaying projects—grid connections, large-load electricity rates, zoning, water permits, and tax incentives—fall under states, public utility commissions, and local governments, so gubernatorial elections may matter more than Senate seats. She characterizes a Republican sweep as the most favorable scenario, divided government as maintaining the status quo, and a Democratic sweep as the least favorable, while emphasizing that the last scenario would not mean a nationwide moratorium. She says the midterms will shape the friction surrounding expansion and investor confidence, rather than determine whether the AI investment cycle continues. All directional outlooks are the speaker’s conditional judgments, not definitive short-term price predictions.