BofA Warns AI Correction Threatens Global Economy as Data Centers Hit Ballot

Bank of America's economists called a sustained correction in the AI trade "a major risk to the global economy" on Monday — one day before voters in 10 states decide 41 local data-center ballot measures. The warning lands at an awkward moment: record construction spending, rising layoffs, and a political backlash that has already killed six data-center proposals this year.

"A sustained correction in the AI trade is a major risk to the global economy," BofA Global Research's economists wrote Monday. "Investors are increasingly concerned about the sustainability of the AI trade, and the more capex rises, the more risks loom."

Their mechanics are straightforward. A slowdown would hit growth directly and through the wealth effect, as stock gains that have propped up consumer spending reverse. BofA also ties some of the rise in interest rates to the borrowing needed to finance the buildout.

What does the backlash actually look like?

Voters will weigh 41 data-center measures on Tuesday, from new requirements for developers to outright construction bans, Axios reported, citing Ballotpedia. The trend so far isn't friendly to the industry: all six data-center measures decided this year — in New Hampshire, Wisconsin, Michigan and California — went against development.

The backlash has climbed to the top of the ticket. Texas Gov. Greg Abbott halted new data-center approvals pending an audit after rural communities pushed back, and his Democratic challenger, Gina Hinojosa, supports a moratorium. In Ohio, Sen. Jon Husted is on the defensive over his past support for data centers in a race that could help decide Senate control. Ohio alone has 21 data-center measures on Tuesday's ballot.

Goldman Sachs' Alec Phillips expects the issue to cool after Election Day. Data centers "emerged as a theme in some campaigns this year," he wrote in a Nov. 1 preview, but the issue ranks low among voter priorities and should "fade somewhat" once governors stop campaigning. He sees Congress possibly limiting tax breaks — but a national moratorium looks unlikely under any outcome.

How big is the boom?

Big enough to distort the national accounts. Data-center construction spending hit a preliminary record annual rate of $84.95 billion in August, up 73% from a year earlier, per the Census Bureau. J.P. Morgan Asset Management's David Kelly told Fortune he expects the squeeze on construction workers and materials to intensify in 2027.

The capex numbers are staggering. Goldman's economists put AI-related hardware investment $613 billion above its 2022 level — roughly 1.9% of GDP. The biggest tech companies are on track to spend about $800 billion on capex this year, up 96%, and analysts expect $1.2 trillion next year, according to Goldman's Ben Snider.

Notably, the rest of the market has started pulling its own weight. Since earnings season began, the S&P 500 has fallen 3% while the S&P 500 excluding AI stocks has risen 5%, Snider wrote.

Where are the jobs?

AI adoption is now measurable — and so is its labor-market toll. Some 24.6% of U.S. businesses use AI in at least one function, up 0.8 points in a single month, and 28.6% expect to within six months, Goldman's Sarah Dong and Joseph Briggs wrote, citing Census Bureau data. In information, professional services and finance, adoption is approaching half.

The impact "has become increasingly visible in recent months," they wrote. Industries with higher AI adoption show weaker job growth and higher unemployment — a relationship Goldman calls statistically significant. Marketing, graphic design, customer service and some tech jobs are taking the hit. Layoffs attributed to AI reached 4,000 in September and total 207,000 since May 2023.

The buildout hires, too: construction jobs tied to data centers are up about 315,000 since 2022 relative to broader construction trends, Goldman estimates.

What happens after Tuesday?

Outside AI, the signals are softening. The Goldman Sachs Analyst Index fell 6.5 points to 49.1 in October — below 50 for the first time since April 2025. New orders dropped 33 points to 29.5, the lowest since May 2020. Asked about top risks for 2027, Goldman's analysts named the war in Iran first, with AI spending and adoption second.

Tariffs rise regardless of the winner, per Goldman: Democrats would likely target a few countries or products, but the bank expects President Trump to announce post-election tariff increases that more than offset them, lifting the effective tariff rate by just under 2 percentage points. Prediction markets imply Democrats win the House with around 236 seats; the Senate remains a closer call.

The practical question for investors: whether Tuesday's votes slow the buildout, or merely shift the AI fight from zoning boards to federal regulators — where Goldman sees compromise on basic oversight and little appetite for anything restrictive.