1-0 to humankind? US midterms vote puts AI, datacentres and the broligarchy back in their box | Heather Stewart
Voters in the United States have delivered a setback to the artificial intelligence industry, rejecting a wave of measures that sought to limit the construction of datacentres.
The cost of living squeeze unleashed by Donald Trump’s war in Iran was a significant driver of the Democrat wave, but AI was also on the ballot in many places.
Dozens of measures calling for limits on datacentre expansion were passed, and elsewhere, reining in the unchecked expansion of the power-hungry mega-sheds was a rallying cry.
At a campaign event, the Texas senator-elect James Talarico recalled meeting a mother who told him the lights from the neighbouring datacentre were so bright, her son thought it was daytime in the middle of the night.
Public backlash and the 'broligarchy'
The public were meant to set aside their qualms for the greater good that AI would bring the economy, but the positive benefits many people may derive from interacting with chatbots coexist with very obvious downsides.
These downsides include the sea of online slop, the proliferation of pervert glasses, and tech firms’ insistence on shoehorning the technology unbidden into every app, platform and device.
Voters have also watched the leaders of the big tech firms become obscenely rich, while average consumers continue to be hammered by inflation.
Ultimately, all businesses in a democracy – even those embraced by the US president – have to operate within the bounds set by society.
Elon Musk’s approach in Texas, where he poured billions of dollars into trying to buy the electorate, just became a selling point for the Democrats.
The opposition seems likely to put the brakes on the hectic pace of investment in building out AI’s physical infrastructure.
Market rethink and fragile sentiment
This shift appears to have accelerated a market rethink that was already under way. As Joe Maher of Capital Economics put it last week: 'Sentiment towards the AI trade was already looking fragile and the US equity market was showing many late-cycle signs.'
As such, this [the midterms] could plausibly become the catalyst that leads to a more long-lasting unwind of the AI equity boom.
Two things can both be true: AI is a transformative technology that will bring welcome productivity benefits; but they won’t be big enough to justify current market valuations.
As the economist Dario Perkins of TS Lombard put it in a recent note: 'What people who worked in tech and finance didn’t realise was that people outside the ecosystem – you know, regular people – just weren’t that interested in AI.'
Yes, it made web search easier (sort of); but contrary to the assumption in Silicon Valley, regular people were never going to use AI to organise their lives or 'run workflow'. Tech insiders were living in a bubble – in at least two senses of that phrase.
Perkins described the industry in late 2026 as essentially '$200bn in current revenues supporting more than $1tn in future commitments from just two companies [Anthropic and Open AI]'.
Broader concerns and the next step
A reckoning was already in the offing, even without the intervention of US voters. The tech-heavy Nasdaq peaked a month ago, and a growing number of voices were sounding the alarm.
The International Monetary Fund pointed last month to 'growing evidence' that the successful rollout of AI 'may not require investment on the massive scale being undertaken by 'hyperscaler' firms', and that 'potential economic gains may not be as large as expected'.
The IMF highlighted the growing capabilities of lower-cost Chinese models and pointed to the circular financing that has become rife within the AI sector.
More recent reports have also highlighted a string of corporate AI users either slapping limits on staff use of costly products such as Anthropic’s Claude, or turning to much cheaper models, hosted on their own servers.
Whether the stock sell-off persists or not, opposition has thrown down the gauntlet for the AI lobby to prove what the tech can do for societies – including those well beyond the US – which are reluctant to accept the very obvious costs.
Related
