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Is the artificial intelligence (AI) craze coming to an end, or are we simply starting to face reality?
This is a question that investors are currently asking, and is also the background to the recent plunge in stock markets around the world.
In particular, the sell-off in the U.S. stock market on the 5th was most noticeable on Nasdaq, where technology giants such as Alphabet, Nvidia, Meta, and Apple are listed.
This decline occurred after the Democratic Party won a landslide victory in the U.S. midterm elections held this week and took control of both houses of Congress.
Key Democratic Party figures have opposed the reckless expansion of data centers, a key foundation for the growth of the AI industry, during the election process.
Accordingly, concerns that regulation of the AI industry will be strengthened appear to have increased investor anxiety. However, questions about the growth potential of the AI industry have already been raised before.
AI boom
ChatGPTI, launched by OpenAI in late 2022, is widely known to have sparked tremendous public and corporate interest in the practical use potential of AI. It also marked the beginning of a modern-day gold rush.
Investors rushed to pour money into companies that produce semiconductors and network infrastructure, companies that build data centers, companies that supply the energy needed to operate them, and companies that develop AI technology itself. The corporate value of technology companies has soared.
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This boom continued until this year. According to a Goldman Sachs study, AI-related investment in 2026 is expected to reach $1 trillion (approximately 1,364 trillion won). As the AI industry has attracted enormous funds, it has resulted in rising borrowing costs for other industries.
But investors ultimately want profits. In recent months, doubts have been growing about whether the AI boom will generate the huge profits expected.
These concerns coincided with a time when AI researchers were questioning the safety of artificial intelligence and even warning that it could threaten the very survival of humanity. These remarks also fueled speculation about the possibility of strengthening regulations.
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Democratic opposition
While the Trump administration is giving full support to the development of AI, or "super intelligence," as President Trump likes to call it, leading Democratic figures have delved into public concerns about the impact of data center expansion on local communities.
Residents' complaints were mainly focused on the data center's enormous power and water consumption. Many people were concerned that this could lead to an increase in household electricity and water bills. In addition, noise, land use, and community confusion were also pointed out as problems.
According to a Gallup poll released in May of this year, 71% of Americans said they were opposed to a data center being built in their area. 53% of respondents opposed the construction of nuclear power plants.
James Talarico, who won the Senate election in Texas, once a stronghold of the Republican Party, is one of the Democratic figures who responded to this skeptical public opinion.
“We want America to maintain its leadership in AI, but we are also still concerned about how AI will impact our jobs and how our children learn,” he said.
“We must protect the American people and establish clear and consistent legal standards for businesses.”
As the Democratic Party now controls both the Senate and House of Representatives, it is expected that it will more strongly oppose President Trump's technology policies. At the same time, there is a possibility that legislation that could limit the expansion of the industry will be promoted.
Gina Hinojosa, a Democrat who won the Texas gubernatorial election, made opposition to data center construction a major pledge and promised a moratorium on the construction of new facilities.
Hinojosa's election could also be a political burden for Elon Musk, who moved a large number of his SpaceX and Tesla business bases to Texas, which has long been a stronghold of the Republican Party.
Musk is reported to have spent approximately $450 million (approximately KRW 613.8 billion) to support Republican candidates in this midterm election.
What is the direction of the stock market?
“Stock value is based on future earnings, not current earnings,” explains Tudor Brown, co-founder of ARM Holdings, a British semiconductor design company. Some investors sell their stocks if they decide that the expected compensation is not as great as expected.
The stock market decline over the past 24 hours appears to have been directly catalyzed by the midterm election results. However, concerns that the corporate value of technology companies is too high have been raised long before the election.
What the market is paying attention to now is whether the current situation is a correction phase in which some of the bubbles in the overheated market will deflate, or whether it is a sign of a bursting of the AI bubble that will have much broader ramifications.
Nandini Roy Chowdhury of Future Market Insights said investors will evaluate the possibility that this change in the political landscape will lead to regulations on data center construction, energy consumption and use of AI technology.
He also predicted that a broad rebound in technology stocks in the short term would not be easy as investors prefer companies with strong financial structures and are likely to invest more selectively.
Brown, on the other hand, believes the impact will be limited. He assessed that AI-related stock prices had risen excessively thanks to “expectations that AI would grow almost infinitely,” and that “a bit of fear” had emerged afterwards.
“There is a natural bottom to the decline in stock prices,” he said. “After that, it will ultimately reflect the reality that these companies are still generating significant profits.”
*This article used artificial intelligence (AI) in the process of translating the original English text and was verified by a BBC reporter before publication. Click to learn more about the BBC's AI use policy.
