![[US Midterm Elections 2026] Why did AI-related stocks plummet?](/api/image?url=https%3A%2F%2Fichef.bbci.co.uk%2Face%2Fws%2F240%2Fcpsprodpb%2Ff055%2Flive%2F19529fe0-d9fb-11f1-93e1-3b657b665bcf.jpg)
image copyrightGetty Images
Theo Leggett International Business Editor, Osmond Cheer Business Writer
Is the so-called gold rush surrounding artificial intelligence (AI) coming to an end? Or is this just a return to reality?
These questions haunted investors' minds, leading to sharp declines in stock markets around the world.
In the United States, the most dramatic selling occurred on the 5th on the Nasdaq market, where giant technology companies such as Google's parent company Alphabet, semiconductor giant Nvidia, social media company Meta, and technology giant Apple are listed.
The background to this is that the opposition Democratic Party gained significant seats in the U.S. midterm elections held on the 3rd, taking control of both houses of Congress.
Most leading Democratic politicians campaigned on policies opposed to the unbridled expansion of data centers that have supported the growth of AI.
This appears to have sparked concerns among investors that AI regulations may be tightened. However, concerns about the future of the AI industry have been growing for some time.
AI boom
U.S. Open AI released the AI chatbot ``Chat GPT'' in the second half of 2022. It is widely believed that this has led to a sudden increase in interest among the general public and businesses in the practical use of AI. And this sparked the modern version of the gold rush.
Investors poured money into companies that make semiconductors, build network infrastructure, build data centers, provide the electricity they need, and develop AI itself. As a result, the market capitalization of technology companies soared.
The AI boom continued into 2026. According to a study by the US financial giant Goldman Sachs, investment in the AI field is expected to reach $1 trillion (approximately 158 trillion yen) in 2026 alone. A large amount of capital in the market is flowing into the AI field, raising borrowing costs in other industries.
But what investors are looking for is profit. Concerns have been growing in recent months about whether the AI boom will generate as much wealth as expected.
Under these circumstances, AI researchers are questioning the safety of AI. Furthermore, opinions are emerging that AI may even threaten the survival of humanity. As this view has been widely reported, speculation has accelerated that AI regulations will be tightened in the future.
Democratic Party opposes data center expansion, etc.
The Trump administration has been fully promoting the development of AI, which the president calls "superintelligence" (SI). In contrast, many leading Democratic politicians campaigned on public concerns about data center expansion and its impact on local communities.
Citizens are primarily concerned about the potential for data centers to consume large amounts of water and electricity, driving up household utility bills, as well as noise issues, land use, and disruption to surrounding neighborhoods.
In a May poll released by the polling firm Gallup, 71% of Americans said they opposed data centers being built in their area. 53% of respondents said they opposed the construction of nuclear power plants.
James Talarico, a Democrat who won the U.S. Senate race in Texas, a Republican stronghold, was one of the candidates who responded to these concerns.
"While we want to protect America's leadership position in AI, we are still exploring how AI will impact everything from the way we work to the way our children learn," Talarico said.
"We need clear and consistent laws to protect Americans and help businesses do business," he said.
The Democratic Party, which now has control of both houses of Congress, is expected to oppose Trump's technology policies even more forcefully than before. It is also possible that they will try to introduce legislation that could curb the expansion of the AI industry.
Gina Hinojosa, a Democrat who was elected governor of Texas, strongly opposed data center construction during her campaign, pledging to suspend new construction.
With Hinojosa's victory, the Texas government could become a rival to Elon Musk, the American businessman who has moved many of the operations of space developer SpaceX and electric vehicle giant Tesla to the state. Texas has long been a Republican stronghold.
Musk has spent approximately $450 million (approximately 71 billion yen) supporting Republican campaign campaigns in the recent midterm elections.
What will happen to the stock market in the future?
"Stock prices are based on future profits, not current profits," said Tudor Brown, co-founder of British semiconductor design company ARM Holdings. If the gains are not as large as expected, some investors may turn to selling.
The decline in global stock markets over the past 24 hours appears to have been triggered by the results of the US midterm elections. But concerns about tech stocks being overvalued long preceded the election.
Is this drop just a way to remove excess expectations from an overheated market? Or is it a sign that the AI boom bubble is about to burst, with broader implications? That's the question now.
Nandini Roy Chowdhury of research firm Future Market Insights said investors will now assess whether changes in the political landscape will lead to restrictions on data center construction, energy consumption and the adoption of AI technology.
Traders are likely to be more selective going forward, favoring companies with solid financial fundamentals, he said, adding that technology stocks are unlikely to see an immediate widespread recovery.
ARM Holdings' Mr. Brown said he expected the impact to be limited. Expectations for "nearly limitless growth in AI" had been driving up stock valuations, but Brown said he believes there has since been "a bit of panic."
"There's a downside support level (where the decline in stock prices is likely to stop or start a rebound). Once that level is reached, the stock prices should reflect that these companies are actually continuing to make a lot of money."
(English article: Why the US midterms sparked an AI stock selloff)
