Market Bloodbath
Cointime reports: The S&P 500 closed down 4.4% at 7,353.73 on Tuesday, its worst day since April last year when President Trump announced ‘Liberation Day’ tariffs. The Nasdaq fared even worse, plunging 5.5% and shedding $2.5 trillion in market value in a single session. The trigger: growing fears that Democrats, poised for midterm election gains, will push through a ban on artificial superintelligence.
The Bill That Sparked the Selloff
On September 23, ahead of the midterms, Democrats introduced the ‘Ban on Artificial Superintelligence Act.’ The bill does three things:
- Permanently prohibits the development and deployment of ‘artificial superintelligence,’ defined either as systems with cognitive abilities equal to or surpassing humans across a wide range of domains, or as systems capable of planning and executing actions that could strip humans of control, including overthrowing or undermining the U.S. government.
- Immediately pauses frontier AI research until a new federal regulator establishes rules and model review processes. Advanced AI would then require federal approval before launch.
- Creates a cabinet-level ‘Department of Artificial Intelligence’ to enforce the law and, with the State Department, push for international agreements—including export controls on AI compute infrastructure.
Violations could result in federal seizure of intellectual property and assets, and company executives could face up to 20 years in prison—penalties comparable to those for illegally developing nuclear weapons.
Political Reality Check
The bill is far from becoming law. Its sponsors, Senator Bernie Sanders and Representative Greg Casar, are among the most left-leaning Democrats, and the proposal received little media attention when introduced. Even if Democrats win both chambers, the president must sign it. But the market is pricing in the tail risk.
Data Center Exposure
The midterm impact is already tangible at the state level. Democratic gubernatorial wins in Texas and Georgia—states that account for roughly one-third of U.S. AI data center spending and projects—could slow construction. Storage stocks tied to data center buildouts were hit hardest, falling an average of 15%.
Earlier this year, Sanders and Representative Alexandria Ocasio-Cortez introduced the ‘AI Data Center Moratorium Act,’ which sought to pause construction and upgrades of AI data centers using more than 20 megawatts until Congress passes comprehensive AI legislation. The bill stalled in committee, but with Democrats potentially controlling both chambers, it could be revived.
Forward Look
The AI industry is on edge. Rumors have circulated that Anthropic’s IPO could be canceled. Some industry leaders privately compare the Democrats’ stance on AI to the Boxers’ attitude toward railways a century ago. Whether or not the bill advances, the political risk premium on AI infrastructure and related equities is likely to persist through the midterm cycle—and crypto markets, increasingly correlated with tech stocks, should brace for volatility.
