Artificial intelligence may be the defining market theme of 2026, fueled by enormous investment in the data centers, semiconductors and infrastructure needed to support it. The Democratic wave that emerged from the midterm election could signal a turning point for US AI policy tied to a fundamental shift in the political environment. Technology companies and data center developers can no longer assume that capital commitments, tax revenues and new jobs will be sufficient to secure community support or approval. We expect the AI buildout to continue, but with more scrutiny and restrictions that are likely to increase costs.
Policymakers are more likely to enact restrictive policies after voters voiced concerns surrounding electricity affordability, water consumption and AI-driven job displacement. AI requires significant amounts of electricity, water for cooling and other supporting infrastructure. These policies could require developers of data centers that power AI to bear more costs for power generation, grid upgrades, water and more. This potential setup could mean still spending heavily on AI, while generating less computing capacity for each dollar spent. That could broaden the list of relative AI beneficiaries beyond the technology sector to electrical equipment, grid infrastructure, power generation and utilities sectors.
A tougher development environment does not impact companies equally. Large hyperscaler technology companies could be relative beneficiaries compared to others as many have established data centers, long-standing utility relationships, substantial financial resources and projects with secured electrical capacity. Those advantages could become relatively more valuable if power generation and regulatory approvals become harder to secure.
See more: After the Midterms: High Expectations and “Good Gridlock”
As the politics play out, here are four key AI-related issues investors should watch.
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Power – Can planned AI projects secure enough electricity? As energy prices rise for residential customers and grids strain to support increased demand, data centers may be forced to pay for their own power needs, grid upgrades or even “Bring Your Own Power” requirements to build and maintain exclusive power systems.
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Grandfathering – The most significant remaining unresolved issue, will projects already approved or under construction be protected from potential new requirements? Most temporary data center moratoriums have historically grandfathered construction for projects already underway or permitted. However, there is no universal rule requiring protection of projects.
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Location – Could tougher rules redirect where AI investment goes? Stricter data center policies in states such as Texas and Ohio could cause developers to reconsider where they build. Future projects may favor locations that protect residents, power grids and the environment while requiring data centers to cover their own electricity, gas and water costs.
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Investment – Could the AI spending boom peak sooner than expected? More restrictive development policies could increase costs, extend project timelines and reduce incentives at the same time investors are debating the sustainability of hyperscaler spending. Together, those pressures could cause companies to reevaluate their capital investment.
With the election behind us, the conversation is likely to shift from how much money hyperscalers plan to spend to how much AI capacity they can bring online, how quickly and at what cost.
All expressions of opinion reflect the judgment of the author and are subject to change. This information is not a recommendation and is for informational purposes only. There is no guarantee that the statements, opinions or forecasts mentioned will prove to be correct. Companies engaged in business related to a specific sector, including the technology sector, are subject to fierce competition and their products and services may be subject to rapid obsolescence. Investing involves risks including the possible loss of capital.
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