Democratic Sweep Puts AI Industry in Washington's Crosshairs

By James Calloway

Half of proposed AI data center projects across the United States could face intensified local scrutiny after Democrats swept the House, Senate and key governors' races in the midterm elections, Bloomberg has reported. AI companies that spent two years cozying up to President Donald Trump are now bracing for the fallout.

The Democratic sweep is poised to ratchet up Congressional scrutiny of tech firms, build momentum for AI safety regulation and — most imminently — tighten state-level restrictions on data center construction. Key states like Texas and Ohio, once a relatively safe harbor for tech companies, could see construction halt until residents get assurances the facilities won't sap water supplies or drive up electricity prices.

"Every hyperscaler is now thinking about 'Do we need to build outside the United States?'" Meta Platforms Inc. President Dina Powell McCormick said at an event the day after the midterms. Elon Musk, CEO of SpaceX and a Trump ally, went further in a post on X: "Data centers in space looking pretty appealing right now."

What does this mean for AI's trillion-dollar build-out?

The uncertainty lands at a bad moment. The market is already worried about the costs and potential payoff of the trillion-dollar infrastructure build-out supporting AI. Heightened regulatory risk and data center slowdowns also threaten new complications for Anthropic and OpenAI as they move toward landmark IPOs for the AI sector.

"I don't think we're going to flip a switch and run from rampant data center to no data center construction, but the terms of negotiation are different," said Doug Calidas, senior vice president of government affairs at Americans for Responsible Innovation, a bipartisan advocacy group that supports stronger AI regulation.

On Thursday, OpenAI unveiled commitments designed to quell the outcry over data centers, including:

• avoiding nondisclosure agreements when it negotiates deals
• ensuring residents don't pay for the electricity powering those projects

"The fact that people have expressed themselves at the ballot box in the way that they have is an important message that people have to listen to and react to and respond to," said Chris Lehane, OpenAI's chief global affairs officer.

Who faces Congressional hearings?

Expect a gauntlet of probes into AI risks — and, in some cases, tech firms' close relationships with Trump. "You're going to see a lot of hearings. You're going to see subpoena power. You're going to see really trying to understand why some of these safety incidents happened," Calidas said, referring to reports of AI agents breaking out of testing environments and accessing other websites.

Nvidia Corp. may face scrutiny over chip sales to China and CEO Jensen Huang's personal relationship with Trump. Senator Elizabeth Warren, a Massachusetts Democrat widely expected to chair the Senate Banking Committee, has pushed for a hearing with Huang — he has declined. Once she takes the gavel, her sternly worded letters can quickly become subpoenas.

"Everyone will need to face the music of the reality of changing alignment in Congress," said Representative Sam Liccardo, a California Democrat whose district covers the heart of Silicon Valley. He added it's "imperative" for his party to focus more on passing laws than stirring up public outcry.

Is federal AI safety law finally possible?

Congress failed to pass meaningful federal AI regulation under both Trump and Biden. Calls for action have grown in recent months as rank-and-file AI staffers warned about the technology's potential to cause catastrophic harms. Trump has dismissed those safety concerns as a "hoax."

"The hope is that some bipartisan coalition will persuade Trump that the AI safety risk is no longer a hoax," Liccardo said. Democrats, he said, should build on the existing Frontier Act, a bipartisan effort creating tiered transparency and audit requirements based on the size of AI developers while preempting state laws.

That may not go far enough for some. "It's not exactly what we want," Representative Suhas Subramanyam, a Virginia Democrat whose district includes the area known as data center alley, told Bloomberg News last month. "I could see a scenario where in the new Congress, we have Democrats present a bill that is a little more aggressive and maybe doesn't have as much Republican support."

Republicans face their own reckoning. "Voters are very clearly saying they want their policymakers listening to them on AI and doing a better job balancing innovation and security — and they are expecting action very quickly," said Janet Kelly, CEO of Alliance for a Better Future, a conservative nonprofit advocating stronger AI safety policy, including child protections.

In a memo published Wednesday, Kelly's group said it "would be political malpractice for Republicans not to course correct" by delivering guardrails for so-called super intelligence — Trump's preferred term for AI. "We should answer with measures that ensure SI is built in a way that Americans trust," the memo said.

With both parties now competing to deliver AI guardrails, the next Congress looks likely to change how tech companies operate — and where they build.