AI faces tighter guardrails and potential growth roadblocks after election

LEXINGTON, Ky. — The tech-heavy Nasdaq fell nearly 5% Thursday in one of Wall Street’s roughest days of the year, led by a sharp drop in artificial intelligence stocks following Tuesday’s election.

The sell-off is tied to investor anxiety over potentially tighter regulations and energy demands for data centers.

Investors react to election results

Analysts said investors are reacting to Tuesday’s election results and anticipating tighter scrutiny on artificial intelligence and potential roadblocks for future growth.

“The elections on Nov. 3 introduced into the stock market and into the AI development market uncertainty. Now, you know, that’s generally what people who invest don’t like,” said Michael Murray, University Research Professor and Spears Gilbert Professor of Law at the University of Kentucky.

Liability, oversight and local pushback

Legal experts at the University of Kentucky pointed to rising concerns over developer liability, pending federal oversight and local pushback against expansive data center construction.

“A lot of candidates ran on a platform of ‘I’m going to hold back data center construction.’ People don’t like the consumption of water, the electricity. That has a ripple effect because if those don’t get built, then it puts a lot of pressure on other data centers in other states.”

Utilities testify in Frankfort

The pushback and concern over scarce power supplies came up Thursday at the state Capitol in Frankfort.

Representatives from Eastern Kentucky Cooperative and Big Rivers Electric testified before lawmakers about how the commonwealth handles data center requests.

Utilities want data centers to cover their own costs, not everyday residents.

“So any and all costs associated with data center development, from the very upfront request for studies, those get borne back by the developer, by the data centers,” said Don Gulley, president and CEO of Big Rivers Electric Cooperation.

Co-op officials told lawmakers that as long as developers pay for all infrastructure upgrades and capacity studies up front, contracts with data centers could eventually help stabilize local electric rates over the long haul.

Local experts said AI remains a powerful economic engine but is now forced to operate under much tighter guardrails.