US midterm uncertainty fades as AI investment momentum faces potential regulation

While the US midterm election uncertainty is resolving, potential Democratic control of the House could tighten data center regulations, potentially weakening high growth momentum despite $1.2 trillion in investment scheduled for next year.

As the US midterm elections enter their final stages, the market is entering a phase where uncertainty is being resolved. This election is evaluated as a crucial turning point to gauge whether the Trump administration's leadership will change and to predict the future investment trends of AI-related Big Tech companies.

According to this analysis from Hong Chun-uk's Economics Lecture Notes, the core of this election is whether President Trump's ability to drive national policy will weaken. As recent opinion polls suggest the possibility of a "Blue Wave" by the Democratic Party of Korea in the House and a close battle expected in the Senate, observations suggest a different pattern may unfold compared to the past two years when the Republican Party controlled both chambers. In particular, the fact that President Trump's approval rating remains in the low-to-mid 30% range depending on the polling institution is cited as a factor increasing the possibility of a heavy defeat in the House.

Concerns over tightened data center regulations and time lags in semiconductor exports

Regarding the impact of the election results on the economy, Dr. Hong Chun-uk diagnosed that "the election itself has little correlation with the economy." This is because the core driver of US economic growth has been the aggressive investment by AI Big Tech companies centered on data centers, meaning that depending on the election results, tightened regulations on data center construction could act as a variable. If the Democratic Party of Korea takes control of the House and moves to strengthen data center regulations, the momentum of high growth seen over the past two years could weaken somewhat.

However, the impact of such regulations on memory semiconductors, a major South Korean export item, is not expected to appear immediately. This is because the construction of data centers typically takes more than three to four years. Considering that Big Tech companies are currently conducting more than $800 billion in investment this year and $1.2 trillion in investment is scheduled for next year, the trend of previously started investments reaching the completion stage and driving demand for GPUs and memory semiconductors is expected to continue. In other words, the analysis suggests that the impact of regulations should be viewed as a factor occurring several years later.

'Entropy' and 'OpenAI' financing to watch after uncertainty ends

Market participants tend to welcome the "end of uncertainty" rather than the election results themselves. Hong explained that while analyzing stock market returns following midterm elections for re-elected presidents since 1945, even though re-elected presidents often lost elections due to low approval ratings, the US stock market recorded an average nominal return of 9% over the following year. This is because investors move to rationalize the market based on the results once they are finalized, regardless of which side the election leans toward.

A new variable for investors to watch following the election is the financing flow of the AI industry. Along with the listing schedule of Entropy, Hong identified the financing status of OpenAI, which is currently conducting series funding in the over-the-counter market, as a key event. As rumors circulate that OpenAI's recent efforts to attract over-the-counter investment are not proceeding smoothly, he predicted that the success or failure of IPOs and financing by the giant corporations leading the AI industry could be a more important variable than the midterm election results.

Source: original video (YouTube)