US midterms unlikely to derail AI investment boom, but shutdown risks loom

The outcome of the US midterm elections is unlikely to derail the country’s artificial intelligence (AI) investment cycle, even if Democrats gain control of both chambers of Congress, according to a report by ICICI Bank.

The report states that where Republicans are vulnerable to losing control, it accounts for only around 15 per cent of total US data centre capacity, limiting the potential impact of a political shift on planned AI investments.

However, a change in congressional control could increase the risk of a government shutdown and a standoff over the US debt ceiling, adding to economic and policy uncertainty.

A Democratic victory in both chambers of Congress could bring greater scrutiny of data centres because of their substantial electricity and water consumption, environmental footprint and employment impact.

However, ICICI Bank said the geographical concentration of data centre infrastructure across a limited number of states could contain the impact on investment plans.

The 15 largest data centre states account for around 82 per cent of total US capacity. States governed by Republicans account for 62 per cent of capacity, while Democratic-governed states account for 38 per cent.

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Ohio, Georgia and Nevada, the three toss-up states where Republicans are vulnerable to losing control, together account for around 13 per cent of US data centre capacity.

According to the report, an average 100-megawatt data centre consumes around 2 million litres of water every day and uses more electricity than 75,000 households.

“Even in the worst-case scenario, only ~15 per cent of the data center capacity could come under increased scrutiny,” ICICI Bank said, adding that the elections were unlikely to have a major impact on the AI capital expenditure cycle.

While AI investments are expected to remain relatively insulated from the electoral outcome, a shift in congressional control could complicate negotiations over government funding.

The existing temporary funding arrangement expires on December 11, 2026, requiring lawmakers to approve a full-year budget or another stopgap measure.

Congress is scheduled to reconvene on November 9, six days after the elections. Disagreements over spending priorities, immigration enforcement, border security and government oversight could make a funding agreement difficult.

ICICI Bank sees a moderate probability of a partial government shutdown in late 2026 and 2027. It noted that divided governments following midterm elections had resulted in shutdowns in two of the previous four instances, excluding a one-day funding gap in 1982.

“Shutdowns significantly lower growth rates in the affected quarter, depending on their extent and length,” the report said. The report also flagged the possibility of a fresh standoff over the US debt ceiling around mid-2027.

The borrowing limit was raised to $41.1 trillion in 2025, while outstanding US government debt stood at around $40 trillion in late 2026. Based on prevailing spending and revenue trends, the US could reach the borrowing limit around the middle of next year.

A Democratic victory in both chambers could give the party greater leverage to seek concessions on government spending, social benefits, taxation and trade policy.

ICICI Bank warned that an intense confrontation over the debt ceiling could increase the risk of a sovereign credit rating downgrade.

The report also highlighted the possibility of increased congressional scrutiny of the Trump administration’s tariff decisions. However, a significant reversal of existing trade measures remains unlikely, according to ICICI Bank.

For businesses, the immediate impact of the midterm elections is more likely to be greater policy uncertainty and delays in government funding decisions than a fundamental shift in AI investments or trade policy.