The expansion of artificial intelligence was an important topic in the election campaign in the USA - especially the gigantic data centers that are being built in many places. If the Democrats, after their success, slow down this expansion, it could even help the industry. However, the danger that the huge AI bubble will burst has not been averted.
The billion-dollar expansion of artificial intelligence “is up for grabs,” writes the US business newspaper “Wall Street Journal” on the day before the American midterm elections. The day after it was clear: the voters had clearly spoken out against it. According to surveys, the power of technology companies and AI developers as well as the expansion of data centers were among the important issues for many voters. Democratic candidates who positioned themselves for stronger regulation of AI companies and against the construction of more energy-hungry data centers were successful across the country. However, this does not necessarily have to be a defeat for the AI industry.
A slowdown in the overheated investment cycle could even be beneficial and reduce the risk of the much-cited AI bubble bursting. This year, global investments related to the expansion of AI and related infrastructure are expected to reach around $1 trillion, the majority of which will be in the United States. This amount is expected to continue to rise in the coming years. There have long been doubts as to whether these investments will ever pay off. Even tech giants like Google, Amazon & Co. cannot raise these sums from their current income, but are instead taking on more and more debt in the form of bonds on the capital market. But investors are now increasingly reluctant to make this money available. According to reports, bond issues for AI projects have recently been postponed.
In addition, the expansion sometimes reaches physical limits. Microsoft reported in its most recent quarterly report that it was unable to spend $5 billion in planned investments due to capacity constraints at suppliers. In some places, the construction industry can hardly keep up with the construction of gigantic computer systems, and chips are also in short supply. This imbalance between supply and demand is driving up prices and increasing doubts about whether investments will ever pay off.
However, none of the companies can afford to drop out of the potentially ruinous race. Since AI not only enables new business models, but could also replace many of the existing ones, technology companies must remain at the forefront of development. However, the political headwind after the election could now make it possible to slow down the AI race together, writes economist and Nobel Prize winner Paul Krugman. In this way, the “AI bubble could potentially be deflated instead of letting it burst.”
Governors could stop data centers
It is significant that, among others, the AI provider Anthropic, which plans to complete what may be the largest IPO of all time in the coming weeks, has urgently advocated for more government regulation and a slowdown in the development of powerful models. However, US President Donald Trump has so far vehemently rejected this idea. Despite their majority in both chambers of Congress, the Democrats cannot easily implement extensive AI regulation without Trump's approval. However, the clear election outcome could also persuade some Republican representatives to deviate from the president's line and work on stricter rules for the AI industry.
The governors of the states are also more important for the development of AI investments than Congress. According to one estimate, Texas, Georgia and Pennsylvania are particularly crucial. In these three states alone, 284 data centers are currently planned with an output of 33 gigawatts. This roughly corresponds to the capacity of all US data centers in 2024. In all three states, Democratic gubernatorial candidates who support a stop or at least restrictions on new data centers have prevailed.
It is not clear whether and for which companies there will be a healthy deceleration in AI expansion or a dangerous shock. That will depend on how strictly the election winners implement the promised measure against data centers and which projects exactly are affected. In the best case scenario, planned construction projects that are not yet being implemented are put on hold. However, it cannot be ruled out that the new governors will also stop projects in which billions have already been invested, for example for the purchase of computer chips. In the worst case scenario, the resulting losses could trigger the dreaded bursting of the AI bubble.
