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On Wednesday morning, Americans awoke to the news that the Democrats had retaken both the House and the Senate. The next day, the stock market hemorrhaged $2.5 trillion.
The tech sector was hardest hit. Alphabet, Nvidia, and the major semiconductor companies shed billions. Tesla and SpaceX, whose founder, Elon Musk, had spent half a billion dollars trying to keep Democrats out of Congress, were suddenly worth approximately $420 billion less than they had been two days before.
In some ways, the election results were a referendum on Big Tech. Recent polls have revealed that most voters want the government to impose new regulations on AI, and many victorious Democrats campaigned on a promise to move away from the unchecked expansionism that has defined the industry during the Donald Trump era. Texas Governor-Elect Gina Hinojosa and Senator-Elect Annie Andrews of South Carolina have both pledged to stop the construction of new data centers, which have been the subject of voter panic across the country in recent months. (These facilities—physical manifestations of the industry’s clout—can raise local electricity costs and pollute the air.) Others vowed to stand up to imperious Silicon Valley elites, or to hold the president accountable for his corruption—much of which is linked to his family’s cryptocurrency ventures. Last week’s sell-off was a sign that the stock market is taking lawmakers at their word.
At the same time, the dip hinted at a potential challenge for Democrats. Voters made clear that they were unhappy with the cost of living, and many Democrats who ran on affordability ended up winning big. Widespread fears about what AI might do to jobs only fueled the party’s comeback. The irony is that AI companies are responsible for a sizable chunk of the United States’ GDP growth; AI products have invaded our professional and personal lives, as well as our pension funds and 401(k)s. All Americans now have a stake in the AI economy, whether they’ve opted in or not. It might even be more accurate to say that, at this point, AI is the economy.
According to a recent Bloomberg story, “nearly $32 trillion in market value had been added to the S&P 500 Index since OpenAI released ChatGPT, and more than half of that gain came from just 10 companies—all linked to artificial intelligence.” The article also noted that “almost all the growth in US business spending last year came from spending on technology,” much of which is, of course, connected to AI and the ongoing data-center build-out. The technology’s effects on the economy are complex, and not purely positive: Demand for AI is contributing to inflation and helping keep long-term-bond yields relatively high. But AI has become so entrenched that Democrats’ efforts to target the industry could have ripple effects. Their challenge will be to regulate AI in the ways they campaigned on without damaging the economy they’ve promised to protect.
It’s no accident that this technology has so thoroughly infiltrated the world of American business. Many companies have been eager to adopt it (despite the lack of proof that it makes workers more productive), and investors are hungry for a piece of what they see as humanity’s next great technical evolution. But the federal government has enabled this expansion too. Even though the industry’s leaders have warned that their technology may destroy the world, and even though AI’s ability to wreak havoc on vital infrastructure, such as banks and power grids, has become clearer and clearer, the Trump administration has refused to implement strict controls on the sector. In fact, the White House has gone out of its way to try to override state-level rule making on AI, asking Congress to adopt its pro-AI policy recommendations. And the president himself has maintained close relationships with Silicon Valley’s leaders and personally invested in AI firms. Recall that the CEOs of Meta, Apple, and Google stood behind Trump at his second inauguration, and that their companies collectively donated tens of millions of dollars to the new White House ballroom.
Meanwhile, the administration’s other policies have weakened the economy. Although the stock market has done well during Trump’s second term, the health of the American economy is measured in more than just the valuations of its biggest companies. The president’s decision to implement tariffs and to start a war in Iran have pushed up the cost of living. Energy prices have spiked, and inflation has lately outpaced wage growth, meaning that workers’ dollars aren’t going as far.
Now lawmakers have a chance to fight for the kind of changes they’ve been promising, and AI is an important part of their calculus. My colleague Matteo Wong wrote earlier this month that AI is an engine of growth, but it’s also hogging some of the attention and the investments that might have once gone to other sectors. “The industry seems to be holding not just the American economy but our entire society hostage,” he explained. “Nvidia, Google, and the like had better succeed financially, or there go your savings.” (Yesterday, Trump joined Silicon Valley leaders in defending Nvidia’s Jensen Huang after reports emerged that the CEO had cheated on his wife with an alleged Chinese spy—another acknowledgement of the country’s deep reliance on Huang and his company.)
It doesn’t help that the Democrats don’t have a coherent plan for reining in AI. As my colleague Rogé Karma has written, individual candidates have proposed some ideas, including a federally controlled kill switch that can shut models down in an emergency and an outright pause on advanced AI development. Some have made the very reasonable point that slowing the growth of AI here in the United States is a moral imperative—a way to safeguard humanity, akin to nuclear disarmament—and that it’s more important than any economic trade-offs. But voters worried about their savings may not ultimately see it that way. There are geopolitical trade-offs, too: Although legislators can choose to hamper AI’s development in the U.S., it’s unlikely that China, the country’s primary tech rival, will choose to do the same.
This week, the stock market has been well on the way to recovery. But if AI companies are weakened in the months and years to come, all Americans will eventually be affected—not just the early investors and executives stewarding this industry. Whatever congressional Democrats decide, the interconnectedness of the AI economy ensures that their moves will have consequences that extend well beyond their chosen targets.
Related:
Here are four new stories from The Atlantic:
- Why Pete Hegseth faces impeachment
- Trump has been corroded by hate, Peter Wehner argues.
- Can Democrats hold Trump accountable?
- The scapegals
Today’s News
- House Republicans elected Representative Jim Jordan as their next minority leader. Jordan defeated the current House majority leader, Steve Scalise, in the race to replace Speaker Mike Johnson, who had declined to seek the leadership post.
- Defense Secretary Pete Hegseth survived an impeachment effort after the House voted 211-204 to send the charges to the Judiciary Committee, effectively blocking them for now. Republican Representative Thomas Massie introduced the articles over Hegseth’s handling of military operations in Iran, Venezuela, and elsewhere, and Democrats may revisit the effort when they take control of Congress in January.
- Anthropic announced that it will be seeking a valuation of up to $1.4 trillion in an initial public offering. The IPO, which is expected next week, could raise $64.4 billion, despite concerns about the company’s profitability and nearly $900 billion in spending commitments.
Dispatches
- The Weekly Planet: As America’s EV fleet ages, old car batteries could be used as backup power for factories, data centers, and more, Nora Lowe reports.
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Evening Read
The Lost World of Aquaterra
By Toby Lester
Imagine a planet that’s home not only to the seven continents you know but also to an immense feature you’ve never heard of, continental in scale. Extending along the world’s coastal shelves from the tropics almost to the poles, this place is roughly equivalent in size to South America, with a total area of more than 6.6 million square miles. During the last Ice Age, it consisted almost entirely of lowland ecosystems: cold grasslands and tundras in the far north, grazed by woolly mammoths and steppe bison; temperate woodlands and open country in the middle latitudes, home to aurochs, horses, and giant elk; tropical forests, grasslands, and mangrove swamps near the equator, inhabited by Stegodons, Asian hippos, and Komodo dragons; and dry scrub in the far south, roamed by marsupial lions, giant flightless birds, and lizards the size of crocodiles. Great rivers, fed by an abundance of lakes and smaller streams, cut their way through many of these lowlands, eventually opening out into marshes, lagoons, estuaries, and tidal flats as they approached the coast …
As it happens, there really is such a place. You’ve almost certainly been there yourself. It has even been given a name—and, no, it’s not Atlantis. It’s Aquaterra.
More From The Atlantic
- The end of Stephen Miller’s recusals
- Autocracy in America: Can ICE be abolished now?
- Alexandra Petri: Jensen Huang’s apology may be the only correct use of AI.
- The trolls’ comeuppance
- Getting too close to Trump was a mistake.
Culture Break
Debate. A new festival devoted to microdramas tried making a case for the vertical format—but instead showcased its mediocrity, Elise Hannum argues.
Explore. As an extra in a Hallmark Christmas movie, Alexandra Petri discovered the trick for making realistic fake snow in July—and the appeal of manufactured holiday cheer.
Rafaela Jinich contributed to this newsletter.
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