Democrats' win could compound pressures on AI spending, Korean chipmakers

Democrats’ sweeping gains in the U.S. midterm elections, combined with growing public opposition to data centers and mounting financing demands on Big Tech companies, could slow the pace of artificial intelligence (AI) investment and weigh on Korean chipmakers, market watchers said Wednesday.

Although the vote counting is still under way, Democrats are poised to win control of both the Senate and the House of Representatives in a historic “blue wave,” representing a major setback for U.S. President Donald Trump and his Republican Party.

According to a report by the Bank of Korea’s New York Representative Office, the election outcome is unlikely to prompt major changes in the Trump administration’s overall policy direction, but could “have a limited impact on AI regulation and the pace of related investment.”

“Even if Democrats control both chambers, they are unlikely to have the two-thirds majority needed to override a presidential veto. That limits what they can actually block or push through. So it’s difficult to expect the election results alone to have an immediate, tangible impact on AI investment,” said Yang Jun-seok, a professor of economics at the Catholic University of Korea.

Still, Yang said, a clearer Democratic push to rein in AI development and investment could become a “meaningful, additional source of pressure” when combined with other concerns already facing the industry.

“From the public’s perspective, there are growing fears that AI will take away jobs, drive up energy bills and harm the environment by consuming large amounts of water,” he said. “At the same time, Big Tech companies are spending so heavily on AI that they are taking on substantial amounts of debt. With interest rates rising, questions are emerging about how long they can sustain that level of borrowing.”

If borrowing costs rise further or the expected returns on AI investment fall short of current projections, the professor said Democratic policy initiatives could become another factor weighing on companies’ investment decisions.

In other words, tighter scrutiny from Washington may not be enough on its own to derail the AI investment boom, but could amplify the impact of existing concerns over financing costs and future profitability.

For Korea, where semiconductor exports are a major driver of growth, any slowdown in U.S. investment in AI infrastructure could have significant implications for chipmakers.

Samsung Electronics and SK hynix together account for more than half of KOSPI’s market capitalization, leaving the benchmark index particularly exposed to shifts in sentiment toward the semiconductor sector.

Some Democratic lawmakers have proposed rolling back the 100 percent bonus depreciation tax break for data center investment, which allows companies to deduct the full cost of eligible capital spending upfront. Others have floated taxes on AI use and profits generated by the technology. Sen. Elizabeth Warren has said that taxing AI would be a policy priority if Democrats regained control of the Senate, Bloomberg Tax reported.

The political risks also extend beyond Washington. State and local governments wield considerable influence over data center development through zoning, permitting and operating requirements. Democratic victories in gubernatorial races in states including Texas, Iowa, Ohio and Georgia — all with significant data center activity — could bring closer scrutiny of new projects and create additional hurdles to construction and expansion.

“Tighter AI regulation could disrupt Big Tech companies’ capital expenditure plans. These companies need to build data centers to deploy the computing capacity they have committed to providing to customers such as OpenAI and Anthropic, and ultimately convert those commitments into cloud revenue,” said Kim Seok-hwan, a senior market research analyst at Mirae Asset Securities.

Delays in data center construction could postpone the conversion of those commitments into revenue, potentially prompting hyperscalers to reassess the timing of further investment. This could, in turn, affect expectations for future demand for high-bandwidth memory and other advanced chips supplied by Korean manufacturers, as well as weigh on semiconductor equipment makers.