‘A major risk to the global economy’: BofA warns about the AI boom the day before a midterm vote framed around data-center backlash

“A sustained correction in the AI trade is a major risk to the global economy,” BofA Global Research’s economists wrote Monday, the day before a midterm vote in which data centers are on the ballot in 10 states. “Investors are increasingly concerned about the sustainability of the AI trade, and the more capex rises, the more risks loom,” they wrote. A slowdown would hit growth directly and through the wealth effect, as stock gains that have propped up spending reverse. Jon Husted is on the defensive over his past support for data centers in a race that could help decide control of the Senate; the state has 21 data-center measures on Tuesday’s ballot. Congress might limit tax breaks for data centers, he wrote, but a national moratorium looks unlikely under any outcome. The Senate is a closer call. AI is also showing up in the job numbers. The labor market impact “has become increasingly visible in recent months,” they wrote. Industries with higher AI adoption now show weaker job growth and higher unemployment, a relationship Goldman calls statistically significant. Layoffs attributed to AI reached 4,000 in September and 207,000 since May 2023. In Congress, Phillips expects the AI fight to move from data centers to regulation, where Goldman sees room for a compromise on basic federal oversight and self-testing, and little appetite for anything restrictive.