Mixing economy and politics gives US a bad post-midterm hangover

Editor's note: Ankit Prasad is a CGTN Biz commentator. The article reflects the author's views and not necessarily those of CGTN

The US is in the midst of wild swings between heady highs and historic lows since the midterm election results came in. In the immediate aftermath of the Democrats seizing the Senate and the House, many on social media were celebrating having reduced Donald Trump to a proverbial "lame duck president"—i.e. one who faces the twin realities of an expiring term and constrained legislative agenda. Given the polarized nature of American society and the enormous scope of the Democrats' victory, the celebration from the winning side is but natural. After all, to the victor go the spoils. But one day on from the results, another set of feelings took over—fear in the stock markets.

In its second trading session since the results came in, Wall Street witnessed an utter bloodbath. Deepest in the red were tech stocks, in particular those related to AI infrastructure. The tech-heavy Nasdaq plunged 5.52%, while the S&P fell 4.36% and the Dow dropped 3.44%. The Philadelphia Semiconductor Index sank 12.25%, while Nvidia fell 9.26% and AMD dropped 17.26%.

The cause is clear. AI infrastructure spending, particularly related to costly data centers, was on the ticket heading into the midterms. Several Democrat leaders have voiced shrill concern over the electricity costs, water consumption and low employment potential of the unprecedented AI buildout. These concerns have come on top of pre-existing posturing against American "oligarchs" and particularly tech billionaires. After the elections, several high-profile election winners from the Democratic Party have doubled down on that line of criticism.

Abdul El-Sayed, Michigan’s US Senator-elect and winner of perhaps the highest-profile midterm race, has explicitly called for a “full-on pause” on advanced AI development. Yassamin Ansari, US Representative for Arizona, has called for a pause on advanced AI development and a ban on artificial superintelligence. The congresswoman believes the AI industry is out of control and that reining it in must be priority No. 1 on the Democratic agenda from day one.

The noise and aggression from the Democratic side paint a picture of striking contrast vis-a-vis what President Donald Trump has been saying. A few weeks after Anthropic CEO Dario Amodei penned a blog post calling for a slowdown in AI development, Trump dismissed his concerns, choosing instead to go all in. Rather than slowing down AI progress, Trump has raced ahead in heralding the arrival of artificial superintelligence, rebranding artificial intelligence as superintelligence.

Trump's logic and motivations for throwing his weight behind AI development aren't hard to fathom. Reports suggest capex for the five largest US hyperscalers alone is running at $1 trillion on an annualized basis as of Q3 2026. Domestic spending on AI infrastructure is currently accounting for approximately 2% of US GDP. Even ballpark numbers are fairly conclusive that AI spending isn't just a driver of US economic growth; rather that it is compensating for weaknesses elsewhere. And that brings us back to Trump.

Following Thursday's stock tumble, Trump, who has long viewed booming stocks and valuations as a validation of his presidency, made his first really combative pushback after his defeat. Bemoaning the market crash, he pinned the blame squarely on the election results, posting "Remember, it wasn't the Republicans, it was the Dumocrats[sic]". Yet Trump's bluster hides his own profligacy.

During the two-year period between his triumphant return to the White House and his midterm humbling, Trump's agenda crashed and burned, rebounding on the very Americans who elected him to office. At the start of his presidency, Trump sold himself as the "Tariff President" who would end America’s "forever wars". Instead, his tariff agenda was largely decimated, but only after Americans were forced to bear the brunt of the tariffs in the form of higher prices. Rather than ending wars, Trump has embarked upon a costly war of his own against Iran that has debilitated the Middle East and brought trade flows through the Strait of Hormuz to a crawl.

US Vice President JD Vance penned a long note following the midterms, blaming the Iran war for the election defeat. Commentary in the US media also made a strong case that higher fuel prices at the pumps as well as their knock-on effects on the cost of living were the main factors behind even devoutly Republican states such as Texas and Kansas flipping to the Democrats.

Businesses don't like a chaotic policy environment — that is almost an unwritten rule. And people don't take well to being squeezed for everyday essentials. Trump's two flagship policy endeavours turned this into a daily struggle. It also didn't help that there was not even a modicum of effort by him or his colleagues to defend against allegations that he used the office of the US President to enrich himself, his family and his associates to the tune of billions of dollars.

The results of the US midterms signals a new reality — one that promises legislative gridlock, vetoes and subpoenas, witch hunts that go beyond politics, government shutdowns, and the start of campaigning for a hectic election cycle that will see both Republicans and Democrats each fielding new sets of presidential aspirants. Its effects will continue to be felt for the next two years, and contains plenty of themes for the world to watch.

Oil prices have moderated since the results came in. But is the Middle East conflict over, or will it drag on? What lies ahead for Trump’s hamstrung tariff architecture and weaponization of trade flows and supply chains? Where does AI go from here? And is the AI alarm merely a feature of the Democrats' rhetoric — or do deeper concerns over AI monetization exist, as was hinted in the market wipeout triggered by Alphabet's lackluster recent results? 

Much could ride on the answers to these questions.