US technology shares have been sliding again today. The drop, as the Financial Times puts it, marks “a continuation of a volatile month for the sector as investors fret about the sustainability of the debt-fueled AI infrastructure boom.”
Elon Musk has been raising the alarm. Alphabet (the parent company of Google) has reported some disappointing news, as have Meta and Amazon. The great fear is that all the circular financing which has sustained the AI boom – tech companies lending money to themselves through various “vehicles” – is about to be exposed, and that institutional investors (pension funds and so on) will start to panic. The trillions spent on AI data centers and computing power could start to freeze up.
All eyes turn, then, toward Tuesday’s midterm elections. A large “blue wave” against the Republicans could cause further troubles in the markets, as the Democrats are expected to use their congressional powers to push for greater AI safety and oversight; numerous seats could be lost to politicians who have campaigned against regional data centers. Donald Trump’s close embrace of AI will be seen as a big reason for his party’s failure.
It’s not been a good time of late for MAGA markets. The election in Brazil, which saw President Lula triumph over the more business-friendly and Trump-aligned Flávio Bolsonaro, saw a huge sell-off of Brazilian equities. The result was a significant setback to Trump’s “Shield of the Americas” strategy in Latin America, a blow that seems likely to be compounded if the mid-term polls are close to correct.
Historically, the financial universe tends to enjoy a bit of relief in the aftermath of the midterms, as uncertainty clears. But, given fresh concerns about the long-dreaded AI financial implosion, the short-term economic outlook looks fraught.
It’s quite possible that the markets will shrug off a Democratic sweep. But we can expect further destabilization if, as insiders and military maneuvers suggest, Trump decides the wake of the election is the moment to launch another air assault on Iran.
Trump has repeatedly teased that idea. In a recent Florida rally, he said, “We may do another little Epic Fury.” Bibi Netanyahu, who neither lost nor won his own re-election this week, and the US President appear to agree on the wisdom of this course of action, even if most of the world disagrees.
In sum, anybody expecting a period of calm as America digests the mid-terms is likely to be disappointed. The final 27 months of the Trump presidency could prove to be the most tumultuous so far. Which is saying something.
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