AI trading encounters "political backlash"! The sentiment among American voters against "data centers" is spreading, and Wall Street is pricing in the risks of a pullback in U.S. stocks.

Concerns over artificial intelligence (AI) and the data centers required to run it are increasingly becoming a sensitive electoral issue, to the extent that Wall Street has been compelled to incorporate this factor into its stock market investment recommendations. Last week, Bank of America Corp. strategists informed clients that if the Republican Party performs strongly in the midterm elections in November, the U.S. stock market will "soar." The team of strategists, led by Michael Hartnett, is particularly focused on the re-election of Texas Governor Greg Abbott and warned that if the Democrats gain control of the Senate as well as the governorship of Texas, the stock market could drop over 10% next year, reaching what is technically considered "correction" territory. Prior to this, Evercore ISI and BCA Research also cautioned that populist reactions surrounding AI could pose risks to the stock market. Henrietta Treyz, co-founder of Veda Partners, an investment advisory and consulting firm based in Bethesda, Maryland, stated, "A multitude of risks is approaching for the major superpower companies in the AI sector." Polls indicate that opposition to the construction of new data centers has become a bipartisan issue in the United States, with voters particularly concerned about the environmental impact and electricity prices associated with data centers. Elected officials are beginning to take notice of this issue, with state governors reassessing tax incentives for data centers, while numerous cities and counties, as well as New York State, have already implemented restrictions on the construction of data centers. Treyz indicated that state-level AI policies will serve as a model for federal government policy-making. She noted that the next Congress is unlikely to undertake comprehensive legislative action, but after the midterm elections, lawmakers will be able to address this issue, which in turn will affect investors' perceptions of future policy directions. This explains why Bank of America is paying such close attention to the campaign between Texas Governor Abbott and Democratic State Representative Gina Hinojosa. Analysts state that this election is effectively a referendum on the conflicting demands of tech companies for AI infrastructure and voters' concerns about affordability, inflation, and the impact of new data centers on local communities. Texas is reportedly one of the states with the highest number of operational and planned data centers in the U.S., and it is also a traditional Republican stronghold. Therefore, any actions taken against data center construction will clearly signal that concerns about data centers are not confined to the Democratic camp. This month, Abbott effectively suspended approvals for data centers seeking to connect to the power grid and called for regulators to review all similar projects that are currently applying for grid access. Hartnett still believes that Abbott's expected re-election is a bullish signal for the AI sector. However, other analysts are concerned about the implications of this review requirement for regulated utility companies, including American Electric Power Company, Inc. and energy producers like NRG Energy. Julian Dumoulin-Smith, an analyst at Jefferies Financial Group Inc., wrote in a report to clients this month that these reviews are "the latest manifestation of the further escalation of anti-data center rhetoric in Texas and across the nation, clearly focused on requiring new data centers to self-generate additional power (BYOG)," adding that Abbott's measures are a "chilling signal" for power stocks. New York's moratorium on large data center construction is also one of the reasons Baird recently downgraded the stock rating of Carter's Incorporated (CAT.US). As companies building data centers have been bulk purchasing their power generation equipment, Carter's Incorporated has become closely associated with AI transactions. However, on the other hand, Morgan Stanley believes that the increasing pressure for data centers to self-generate power instead of connecting to the grid will actually benefit companies like GE Vernova (GEV.US) and Bloom Energy (BE.US). The Morgan Stanley research team, led by Michele Weaver, wrote in a report this week: "As community opposition to data centers intensifies, policy actions are increasing. We expect discussions surrounding this issue to broaden as its importance to voters rises leading up to the midterm elections." Of course, all of this does not mean that Wall Street is turning bearish on AI transactions. The S&P 500 index remains close to historically high levels, with companies benefiting from AI technology spending continuing to dominate the market. The Philadelphia Stock Exchange semiconductor index has risen 78% since 2026; despite experiencing a significant pullback in August, it still looks set to achieve its best annual performance since 1999, as capital spending continues to flow to chip manufacturers. Aniketh Shah, head of global Washington affairs, sustainability, and transformation strategy at Jefferies Financial Group Inc., stated that in the short term, AI infrastructure-related stocks may experience significant volatility. However, he pointed out that if the federal government intervenes and streamlines the currently fragmented and state-regulated technology supervision system, this will ultimately benefit investors in the long run. Shah remarked, "This will become a regulated technology, like all other normal technologies. In the long term, this is favorable for AI investments because if you want a technology to have a future, you need regulation."