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Chanana said a tighter regulatory environment could make investors more demanding about the funding and profitability of AI infrastructure.
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Investors are shifting focus from companies expanding AI capacity to those demonstrating meaningful returns, Chanana said.
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Saxo added that upcoming corporate earnings, including Nvidia’s results, would provide a more meaningful test of the AI investment outlook.
Technology and AI stocks could face uncertainty after the Democrats’ sweeping victory in the midterm elections, with Saxo Bank stating that increased regulatory scrutiny could add to existing concerns about soaring investments and stretched valuations.
The Democrats won control of both the House of Representatives and Senate, potentially limiting President Donald Trump’s legislative agenda during his remaining two years in office.
At the time of writing, the SPDR S&P 500 ETF (SPY) was up 1.2%, the SPDR Dow Jones Industrial Average ETF (DIA) gained 1.6%, and the Nasdaq-100 tracking Invesco QQQ Trust (QQQ) moved 1%.
Retail sentiment surrounding Global X Artificial Intelligence & Technology ETF (AIQ), SPY and QQQ on Stocktwits trended in the ‘bearish’ zone, and ‘neutral’ for DIA.
Saxo Highlights Potential Risks
Saxo Chief Investment Strategist Charu Chanana flagged three risks for AI companies: more oversight, data-center restrictions and capital spending uncertainty.
Chanana said a Democratic-controlled Congress could increase oversight of AI companies, including their competition practices, data privacy and model safety. Data-center developers could also face more scrutiny over electricity consumption, rising power costs, water usage and construction permits, potentially delaying projects and increasing expenses.
The analyst added that a tighter regulatory environment could make investors more demanding about the funding and profitability of AI infrastructure.
NVDA Earnings Offer Better Picture Than Political Outcome
Chanana does not expect the AI boom to end but believes investors are shifting their focus from companies expanding AI capacity to those demonstrating meaningful returns.
Chanana identified three groups: established technology leaders and chipmakers with strong finances, capital-intensive data center developers facing funding risks, and companies using AI to improve productivity without making massive infrastructure investments. Saxo suggested that the last group could increasingly attract investor interest. “The political result provides a catalyst for repricing,” the note read.