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Potential Midterm Outcomes: Impact on AI Investments
Market research firm Bull Theory suggests that a Republican defeat in the upcoming November midterms could significantly impact the artificial intelligence (AI) sector, potentially leading to a collapse of the AI investment bubble.
AI Industry Financial Trends
Bull Theory articulated on X that the AI market’s growth heavily hinges on increased capital expenditures. Notably, major players, such as Amazon.com Inc. (NASDAQ: AMZN) and Alphabet Inc. (NASDAQ: GOOGL), are expected to invest approximately $800 billion by 2026, marking a tenfold increase from 2019 levels.
Furthermore, research from JPMorgan highlights that spending on AI is predicted to consume 93% of the cash flow of these hyperscalers in 2026, a significant rise from just 33% in 2023.
The reliance on external financing is set to escalate, with predictions that hyperscalers could issue around $250 billion in bonds by 2026, up from about $121 billion the previous year. “So AI is becoming more dependent on debt and external financing at exactly the wrong time,” noted Bull Theory.
🚨 TRUMP LOSING THE MIDTERMS COULD BE THE TRIGGER THAT POPS THE AI BUBBLE. The reason comes down to two things: Politics and CAPEX. The AI boom now requires an enormous amount of spending to keep growing. Major hyperscalers are on track to spend nearly $800 billion on CAPEX…
— Bull Theory (@BullTheoryio) September 30, 2026
Tightening Financial Conditions
The research also points to potential challenges arising from increased borrowing costs due to Federal Reserve interest rate hikes, which currently range from 3.75% to 4.00%, combined with surging Treasury yields.
It was noted that President Trump has been advocating for lower rates, and a potential loss of Republican control in Congress could diminish his influence on a “pro-liquidity” agenda, representing an additional risk for the increasingly debt-dependent AI sector.
Congressional Implications for AI Capital Expenditures
Bull Theory highlighted that while Trump has incorporated rapid AI infrastructure development into his policies, a Democratic Congress may enforce stricter regulations regarding energy consumption, water use, and environmental impact, which could hinder capital spending plans.
Notably, Senator Elizabeth Warren (D-Mass.) has expressed concerns over Trump’s backing of AI data centers, stating that American households should not bear increased electricity costs to support the expansion of large tech companies in AI.
Bull Theory concluded, “A Republican loss wouldn’t reverse all of that overnight, but it could add congressional pressure to an AI CAPEX cycle that is already becoming much more expensive to finance.”
Market Sentiment from Crypto Traders
Market sentiment on platforms like Polymarket indicates a low perceived risk of an AI bubble burst, with traders estimating a 9% chance of a collapse this year and a 17% likelihood by mid-2027.
Sam Rines, a macro strategist at WisdomTree, indicated that any reductions in capital spending by hyperscalers could heavily impact sectors such as semiconductors and infrastructure, putting companies like NVIDIA Corp (NASDAQ: NVDA) at a heightened risk.
Recent trading data shows NVIDIA shares increased by 0.54% in after-hours trading, following a 0.51% rise to $228.38 during the regular session, signaling ongoing investor confidence.
This article “Trump Losing Midterms Could Be the ‘Trigger’ that Pops AI Bubble, Says Market Analyst — Here’s What Crypto Punters Think” originally appeared on Benzinga.com.
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