Democrats gained 41 House and eight Senate seats and will control both chambers of Congress. Citi says the vote puts economic policy, AI investment and markets under scrutiny, but not necessarily the policy trajectory.
Democratic gains shifted control of Congress, and Citi says the result puts U.S. economic policy, AI investment and markets under scrutiny. Democrats secured both chambers when the 120th Congress begins on January 3, 2027, although several races remained uncalled.
Citi cites living costs and AI concerns
Citi cited frustration over living costs and concerns about AI infrastructure. U.S. consumer prices have risen 30% since the pandemic, or about 4% annually.
Pandemic-era inflation drove much of that increase, while tariffs and the Iran conflict added pressure on purchasing power. Longer-term inflation expectations rose across political groups, although Republican expectations remain below levels when Donald Trump took office.
AI backlash raises the prospect of state-level rules
According to a Wall Street Journal survey cited by Citi, fewer than 30% of Americans support AI deployment at its current pace. Concerns include data centre construction, grid strain, electricity bills and job losses.
Residential electricity prices in the five states with the most data centres have risen nearly 20% since ChatGPT launched in late 2022, against a 12% national median. Democrats won gubernatorial races in three of those states: Texas, Ohio and Georgia.
Markets have reassessed whether opposition could prompt tighter regulation and slower AI spending. That added to volatility in U.S. equities, particularly AI-linked shares.
Citi expects limits at the federal level
Citi sees limited scope for a federal reversal because Democrats lack veto-proof majorities or the 60 Senate votes needed to overcome a filibuster. It sees greater scope for state and local restrictions, such as removing data centre tax incentives, shifting electricity costs to operators and siting rules that steer facilities towards brownfield industrial sites.
The bank expects regulation to change infrastructure's location, cost and pace rather than halt the AI investment trend. Investors will watch AI capital expenditure and state rules that could raise costs or delay projects.
Source: Investing.com
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