Could US Democrats burst the AI bubble after global tech shares plummet? | Global News Podcast

Welcome to the Global News Podcast from. the BBC World Service. I'm Ankur Desai. Here's what's coming up. Could a see change in US politics kill. the AI race? Could people power prove to. be the pin that burst the AI bubble? shares have been plummeting on stock. markets around the world after the. Democrats sweeping victory in American. mid-term elections. AI and data centre. regulation became key issues in. battleground states and voters rewarded. Democrats who promised to reign in the. industry.

We'll ask our Seoul correspondent what. this has meant for tech [music] giants. in Asia. >> A lot of these huge profits that we've. been seeing for the past two years, [music] what happens to them then? >> Plus our business correspondent tells us. why concerns about AI extend far beyond. US politics. >> It reflects wider anxieties that have. been building up about the tech sector. as a whole. >> [music]. >> It's been a dark couple of days for. stock markets around the world. The. Nasdaq in the US lost an estimated $2.5.

trillion on Thursday, while stocks in. Taiwan had their worst week in 25 years. Asia is home to some crucial links in. the tech supply chain and fears about. new regulation in the US were felt. deeply on the other side of the Pacific. as we heard from our Seoul correspondent. Jake Kwon. >> This morning the market opened with a. sharp sell-off and when the KOSPI, the. main index here in South Korea slipped. more than 8 percentage points, the. circuit breaker was triggered. This.

means that for 20 minutes all trade of. stocks was suspended in order to prevent. any panic sells. Now that did not stop. the investors slipping confidence. because the market have closed and now. it's it's it closed at -6 percentage. points and this is not just South Korea, this was same for Nikkei as well as. Taiwan. Uh these are the places where. there are giant chip makers and these. tech companies were particularly hard. hit from the result of the US election.

The fear here is that. the the with the Democrats in power, they will introduce more regulations on. the AI data centers. And these chip. giants here in South Korea like Samsung. Electronics and SK Hynix, as well as the. Kioxia in Japan and TSMC, they are some. of the largest. suppliers of the memory chips which are. critical component in these AI data. centers. So if the Americans are no. longer expanding these AI infrastructure. and buying these memory chips, a lot of.

these huge [snorts] profits that we've. been seeing for the past two years, what. happens to them then? And whether this. AI boom will still continue and the and. the investors were were gripped in fear. today and this is why there was a mass. sell-off. >> As Jake mentioned, this global drop in. tech shares is being blamed in large. parts on fears that Democrats in the US. will crack down on the AI sector. Across. the country, voters came out for. Democrats who vowed to regulate big. tech, even in states that have become.

crucial AI hubs. Gina Inhofe, the first. Democrat elected governor of Texas in. more than 30 years, has promised a. moratorium on data centers. And Ohio. governor-elect Amy Acton has said she. will freeze new data center projects. unless developers pay for their own. power. Polling data from AP and other. news organizations found that more than. half of Americans surveyed said AI data. centers were a crucial or major factor. in their vote. But is that the only. reason for this drastic drop on the.

stock markets? I asked our business. correspondent Theo Leggett. >> It's pretty clear it's been triggered by. the Democrats winning both houses of. Congress in the midterms, but it. reflects wider anxieties that have been. building up about the tech sector as a. whole. Now, when we look at the impact. of the Democrat victory, it's notable. that throughout the campaign. a number of leading Democrats were. focusing on the growth of AI and data. centers as something that voters didn't.

like. Voters reservations about having. data centers in their backyard because. they consume a lot of water, they. consume a lot of electricity, so people. are worried about their own supplies and. what effect it'll have on their bills. They're also very intrusive. They take. up a lot of land, they don't look. particularly good, they make a lot of. noise, and they're associated with a lot. of traffic. And in fact, Gallup did a. poll earlier this year which suggested. that more voters in the US would oppose. having a data center in their backyard. than a nuclear power station.

So there is this antipathy among the US. population towards the expansion of data. centers and AI, but this is something. that the Trump administration had. championed. You know, Donald Trump likes. to describe AI as super intelligence, he's all in, he was not regulating it. The prospect now, with the Democrats in. control of Congress, is that there could. be much tighter regulation in future of. AI growth and the building of future. data centers. And that means the. equation that investors make about if I.

invest this much, how much will I get. back, has changed. It's made AI generally seem a less. attractive investment than it might have. been, and that produces a sell-off. But it is. not the midterms in isolation. There are. other deep-seated concerns. >> Anthea, could you fill us in on some of. those other concerns about AI? >> Well, you can't have failed to notice. that over the past few months we've had. AI researchers coming out and voicing. their concerns about the rapidity with.

which generative AI is being developed. and the consequences that that could. have, even predictions that it could be. an existential threat to humanity. Now, that kind of stuff grabs attention and. it does make regulators more likely to. regulate, and a more tightly regulated. industry may not be as profitable. And. then there's the wider picture of will. people be wanting to to put their money. in future into AI applications? Will. there be a market for this stuff? Will. it generate the revenue that's expected? And that's a tricky one.

>> Yeah, some people are asking the. question, could People Power prove to be. the pin that bursts the AI bubble. And. could this be the end of the AI race. temporarily? >> Well, the question there is whether or. not this is an AI bubble. Now, what we have seen is since about. 2022 with the release of ChatGPT and so. on, a massive increase in interests in AI, the power of generative AI, large. language models, and so on. And. companies have been plowing enormous. amounts of money in. Investors have been.

putting huge amounts of money into. developing AI and the infrastructure to. go with it. So the networking. infrastructure, the data centers, software, everything like that has been. attracting a huge amount of money. So. much money in fact that other industries. have found it more difficult to borrow. what they need in order to invest and. they've seen their interest rates go up. That's produced very very high. valuations for tech companies. So the. value of the Nasdaq composite, the tech-heavy index in the United. States that has the likes of Microsoft,

Nvidia, Alphabet listed there, it's. increased by more than 50%. since over the past five years. And. that's even taking into account the. falls that we've seen recently. So. there's been all this money going in. Now, investors put money into companies. as I said because they want a return. If. the expectation of a return is not. there, the money will leave. So the real. question is, are these tech companies. massively overvalued or is this just a. bit of overexuberance that can benefit.

from a short-term correction? >> AI is something which we know has. adapted quickly and learns to adapt. continuously. So do the tech companies, the AI companies in particular, do they. now need to learn to adapt in response. to the backlash against artificial. intelligence and data centers? >> Yes, absolutely they do. I mean, first. of all, it's how do you get the data. centers that you need without upsetting. local communities and making yourself. the center of the story. There are questions over how difficult. it might become to raise money. So in an.

environment where everybody wants to. pour into AI, it's easy to raise money. cheaply. When the skepticism starts to. grow about AI, then it becomes more. difficult, debt becomes more expensive, companies that are already indebted. might find their outgoings increasing. Um so that's a more restrictive. environment that has to be adapted to as. well. But fundamentally the question is, will AI live up to expectations? We have. had huge amounts of investment going in. This year alone the amount of investment.

globally going into AI is about a. trillion dollars according to Goldman. Sachs. Now that investment needs a. return. But will AI ever be able to generate the. money that's expected of it? That is the. big question. And that's all for now. To hear more. about the topics we covered today you. can find the audio version of the Global. News Podcast wherever you get your. podcast from. If you'd like to get in. touch our contact details are below. I'm. Ankur Desai and until next time goodbye. >> [music].