AI giants are launching a charm offensive after a share selloff slashed over $3.6 trillion (US$2.5 trillion) from US sharemarkets, days after a decisive US electoral victory by Democrats that’s expected to drive a surge in AI regulations that will have global repercussions.
Investors panicked as the results of the midterm elections – in which dozens of Senate seats and the entire House of Representatives were up for grabs – confirmed fears that business-friendly, anti-regulation Republicans had lost their grip on the country’s lawmaking bodies.
The selloff began after the election of anti-data centre Governor Gina Hinojosa of Texas, who has flagged her intent to push forward with restrictions on data centre construction in a state whose expansive rural areas have been heavily targeted by AI companies.
She’s not alone: voters in 41 municipalities were also asked to weigh in on data centre related ballot measures, with 40 passing measures to stop in-progress or planned data centres.
The ‘Magnificent Seven’ tech giants – which include Nvidia, Apple, Microsoft, Amazon, Alphabet, Meta Platforms and Tesla – collectively lost over $1.4 trillion (US$1 trillion) in market capitalisation as the Nasdaq dropped 5 per cent, S&P 500 lost 4 per cent, and Dow Jones Index fell 3 per cent.
Illustrating the breadth of investors’ panic, some 4,166 different Nasdaq shares declined while just 855 grew – a five to one ratio – with shares of Australian tech darling Atlassian dropping 14 per cent despite turning in strong first-quarter earnings figures that exceeded estimates.
Australia’s ASX, which has less direct exposure to AI and tech-related shares, was less directly hit but still felt the ripples of a global sell-off of copper futures, which serve as a proxy for AI data centre expectations because those facilities rely extensively on copper wiring.
While some shares rebounded – the tech-heavy Nasdaq climbed 1.68 per cent before the weekend as tech giants rose marginally – the implications of the financial rollercoaster are still becoming clear as Democrats move to solidify power and deliver on their promises.
A handbrake for AI data centre development?
A CNN poll of nearly 80,000 voters found AI and data centres were one of several key deciding factors – and their ’rejection highlights the challenge Democrats face in ramping up AI regulations while maintaining the economic growth the companies have created.
President Donald Trump, who previously attacked what he called “my predecessor’s attempt to paralyse this industry” and declared war on a “patchwork” of “cumbersome” state regulations, now says he “doesn’t mind guardrails” and will work with Democrats on AI safeguards.
Voter antipathy towards data centres has become a global phenomenon, with Australian developers looking out of Sydney amidst widespread opposition to new sites as local authorities pushing for a pause in what has become the world’s third largest data centre market.
“Regulation will escalate” after the Democrats’ wins, said Dr Yongxin Yu, a senior lecturer within Monash University’s Faculty of Business and Economics, who said US changes to “unstoppable” AI will be felt here and warns that “regulation is necessary.”
“The bigger story for Australia is not the ASX, which is resource heavy and will feel only a muted hit,” he said, warning that “our firms and households rely on US-developed AI models so changes to regulation could restrict what we can access.”
AI, Yu said, “is now a race between nations and central to national security…. The sell-off re-prices that regulatory risk, but it doesn’t end the AI boom.”
AI giants launch charm offensive
Not even Elon Musk’s $600 million (US$400 million) of campaign investments could win over voters – and their message has not been lost on the tech giants, which are rushing to court a disaffected populace and lawmakers hoping to turn the midterm wins into a 2028 Presidency.
OpenAI, for one, capped off the week by announcing a raft of policy changes that will see it engaging more proactively with local communities – including a ban on non-disclosure agreements with public officials and transparency around local planning documents.
The new National Community Compact, OpenAI said, “proposes policies to help ensure that compute campus development gives communities a meaningful voice, protects families from new costs, and broadly shares the economic gains of AI.”
These include promises to “pay the full cost of” data centre power and infrastructure; to publish construction plans, water plans and noise studies; to “create opportunities” for local workers; and to “provide financial assurances” against the risks if projects are delayed, reduced, or cancelled.
Congress, the company notes, can support responsible growth of AI data centres by speeding up transmission upgrades and “restoring and expanding” clean energy tax incentives.
Australian authorities will be watching closely, including Greens Senator Sarah Hanson-Young, who urged the Albanese Government to “heed the warning from the US and put in place an immediate moratorium on data centre approvals”.
Australia has become “the new wild west for the US data centre operators,” she added, “because America has seen the writing on the wall and our regulations here at home are not up to scratch…. But the sentiment that data centres are an ‘automatic good’ has been proven wrong.”
