With U.S. voters set to choose Congress in Tuesday’s midterm elections, investors are weighing how a change in party control could shape federal spending negotiations and oversight of the data-center buildout supporting artificial intelligence (AI).
Reuters described Democrats as likely winners of the House of Representatives, while control of the Senate remained uncertain. Republicans held both chambers during the opening two years of President Donald Trump’s second term, the outlet reported.
The Congressional Budget Office (CBO) calculated a $2.0 trillion deficit for fiscal 2026, $218 billion above fiscal 2025. Revenue increased by $169 billion, or 3%, while outlays rose by $386 billion, or 6%. The CBO pointed to higher net interest and increased spending on major benefit programs, defense and education among the pressures on outlays.
The Government Accountability Office (GAO) put the immediate borrowing costs associated with debt-limit uncertainty at $107 million to $161 million, in 2024 dollars. Its estimate covers Treasury securities issued during periods of acute market concern around debt-limit impasses between 2011 and 2023. The GAO also said such standoffs can disrupt financial markets.
AI oversight is another concern for companies building the infrastructure behind the technology. In an Oct. 22 report, Reuters said analysts it interviewed expected Democratic control of both chambers to bring more congressional hearings and investigations into AI and data-center development. Those analysts were skeptical that Congress would pass legislation that materially slows construction.
Morgan Stanley said state and local decision-makers may have greater influence over projects through possible moratoriums, electricity costs and community concerns. Morgan Stanley Research projected hyperscaler capital outlays could reach $1.5 trillion in 2027. The firm said developers may be asked to absorb power costs, help fund infrastructure or address local concerns, while utilities and infrastructure businesses could benefit from related investment.
Jim Caron, chief investment officer of Portfolio Solutions Group at Morgan Stanley Investment Management, said, “I’d caution against the assumption that divided government is automatically positive for markets.”
Reuters’ Nov. 2 preview said analysts expected 65,000 jobs to be added in October. The U.S. nonfarm payrolls report is scheduled for Friday, Nov. 6.
