AI has been the market's engine, but politics is climbing into the driver's seat. That potential shift has Wall Street gaming out headline risk for AI leaders that have rallied hard and trade with little room for error.
Zacks Investment Management's Brian Mulberry, serving as chief market strategist, was blunt: "There would be, on a volume level, more and louder hearings" on AI safety if Democrats outperform in November. More Washington noise means more volatility as traders handicap what Congress could do next.
Democratic leaders are preparing inquiries aimed at firms connected to the Trump administration, as well as to the president's family. And midweek, a group of Democratic senators urged President Donald Trump to reach a deal with China that would have both sides either slow the pace or temporarily halt AI development. Beyond tech, Evercore ISI thinks committees will dig into affordability flashpoints for voters across energy, healthcare, food and agriculture. There is also a known risk for companies, such as Intel Corp., that took equity investments from the US government.
Legislatively, even a full Democratic takeover would still run into President Trump's veto, making new laws very difficult without his buy-in. He has become a supporter of the AI industry and has rejected calls to cap data center expansion or to tap the brakes on advanced model development.
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For now, investors have largely shrugged at the regulatory chatter. The Philadelphia Semiconductor Index has bounced after a choppy spell, and the Nasdaq 100 on Tuesday logged its first record since June. One reminder of the political overhang: Oracle slid as much as 5.7% as the cloud giant took steps to avoid escalating costs tied to a data center project encountering resistance.
Committees do more than hold hearings - they can float bills. If prediction markets have it right and a blue wave materializes, investors may start discounting what could follow after the 2028 election, including the prospect of higher corporate taxes and stricter AI rules. As Citigroup's Scott Chronert put it, a Democratic sweep "hands key committees to Democrats, a marginal negative in our view for the AI trade and previous deregulation beneficiaries." He added that "Two years of market-negative legislation could reach President Trump's desk for veto, creating a policy backlog ready to advance quickly post-'28."
If you hold names exposed to AI or the data center ecosystem, the near-term story looks like more headlines, more hearings and a wider scope of probes. How much that matters to your wallet comes down to how much of your portfolio rides on policy-sensitive winners versus businesses with fewer DC tie-ins.
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