The Washington Post reports:

The Democratic Party’s takeover of Washington and key state capitals — coupled with an abrupt financing chill — threatens the artificial intelligence boom that has been driving U.S. economic growth and stock values.

Investors worry that Democrats, emboldened by their landslide win on Tuesday, will slow the nationwide buildout of AI data centers.

The shift in political power in states such as Texas, Ohio and Michigan comes as Wall Street’s willingness to finance the industry’s trillion-dollar AI plans was already waning.

Bond investors on Friday demanded yields of more than 16 percent to lend money to CoreWeave, a data center company that paid around 10 percent for borrowed money earlier this year. Several data center companies — including one backed by chipmaker Nvidia — abandoned plans for initial stock offerings this month as investor sentiment cooled.

Wall Street’s rethinking accelerated this month as it became clear that growth forecasts for top AI companies were overly optimistic. In advance of its planned stock market debut, Anthropic last week said its third-quarter revenue growth dropped to 47 percent from 144 percent in the previous quarter.

Some analysts expect that number to fall by half in the final three months of the year. Growing investor doubts about AI emerged on Thursday when a tech stock plunge erased roughly $2.5 trillion in wealth.

“Some of the cracks in the AI thesis are starting to emerge,” said Ara Kharazian, lead economist for Ramp, a spend-management company. “The market is trying to parse out the winners and losers here.”

If the AI industry’s investment math no longer works, the U.S. economy could take a hit. Sagging stock prices would threaten consumer spending on goods and services, which accounts for nearly 70 percent of the economy. Delays in AI infrastructure investment could knock out one of the props beneath strong recent growth in output and hiring. [Continue reading…]