Latest / Drive with John Perlman / Global stock markets have tumbled after investors sold tech shares on fears that the US midterm elections

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Global stock markets have tumbled after investors sold tech shares on fears that the US midterm elections · Drive with John Perlman

• 0:00
  Speaker 1: Let's walk the talk. Well, politics invariably has financial and
• 0:03
  Speaker 1: economic consequences. And in the United States, some of the
• 0:08
  Speaker 1: exhilaration from the Democrat side, at least, of the convincing
• 0:14
  Speaker 1: takeover of both the Senate and the Congress has had
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  Speaker 1: other reverberations, some of them perhaps unexpectedly. Global stock markets
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  Speaker 1: tumbled over the last 24 hours. after investors sold tech shares,
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  Speaker 1: and their fear would be that the US midterm elections
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  Speaker 1: and their outcome could slow the development of artificial intelligence,
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  Speaker 1: something in which many huge companies, and we're thinking Apple, Nvidia, Tesla,
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  Speaker 1: and others have spent huge fortunes fortunes that in many
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  Speaker 1: ways are investments in things that have not yet been
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  Speaker 1: fully developed. So what's going on there? Is that just
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  Speaker 1: a blip or does this reveal a real vulnerability about
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  Speaker 1: the financial prospects of those companies and that financial trend?
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  Speaker 1: Duncan McLeod is editor of Tech Central and joins us
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  Speaker 1: now with his take. Duncan, welcome and thanks very much
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  Speaker 1: for giving us your time. I'm keen to know from you,
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  Speaker 1: is this something that kind of It's a little bit
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  Speaker 1: of an eek moment and then it's business as usual.
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  Speaker 1: Or were things said during the elections by politicians on
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  Speaker 1: both sides suggesting that the confidence with which some of
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  Speaker 1: these big tech companies have been striding forward may have
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  Speaker 1: been misplaced?
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  Speaker 2: Yes. Hi, John. Thanks for having me. Yeah, I mean,
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  Speaker 2: politics definitely has an impact on business sentiment today. And
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  Speaker 2: there is certainly a perception that the Democrats are more
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  Speaker 2: favorable towards regulation and intervention in the economy. And there's
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  Speaker 2: no doubt that the Trump administration took a very laissez-faire
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  Speaker 2: approach to AI, a hands-off approach saying, you know, let
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  Speaker 2: the market develop, let's not smother it with regulation right now.
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  Speaker 2: And I think the Democrats are are probably more likely
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  Speaker 2: to want to regulate the sector. We know that data
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  Speaker 2: centres were a big factor in people's voting decisions in
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  Speaker 2: America this time around. There is a broad unhappiness about
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  Speaker 2: the impact that this data centre boom is having, particularly
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  Speaker 2: on prices of things like electricity.
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  Speaker 1: Yes.
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  Speaker 2: These data centers consume a huge amount of power, and
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  Speaker 2: where they're getting built, it's pushing up. It's not like
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  Speaker 2: South Africa where we have regulated electricity prices for the
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  Speaker 2: whole country. The electricity market in America is very deregulated,
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  Speaker 2: and so data centers might go up in one town
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  Speaker 2: or city and push up. So, you know, voters are
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  Speaker 2: seeing this, you know, data center goes up next door,
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  Speaker 2: next thing I'm paying twice as much for electricity. So
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  Speaker 2: I think there's been quite a bit of pushback from
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  Speaker 2: American voters towards the data center boom. And in fact,
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  Speaker 2: companies like OpenAI and others have gone on a charm
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  Speaker 2: offensive now to try and convince voters. the American electorate
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  Speaker 2: that data centers are good for the economy and good
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  Speaker 2: for jobs and good for economic growth. But I think
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  Speaker 2: there's a lot of skepticism out there. But yeah, certainly
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  Speaker 2: the decline we saw, the crash we saw, almost a
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  Speaker 2: crash in the stock market in the U.S. was, I think,
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  Speaker 2: a direct result of investor fears that the Democrats, who
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  Speaker 2: now have control of the House and the Senate, could
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  Speaker 2: use that newfound political power to begin to investigate some
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  Speaker 2: of these companies and perhaps implement regulations that would be
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  Speaker 2: a lot tougher than the Republicans might have imposed.
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  Speaker 1: Duncan, if there's a serious blocking of data centers on
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  Speaker 1: a scale that perhaps goes beyond what we're seeing now,
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  Speaker 1: and what was interesting about it was an issue from
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  Speaker 1: as much in, although one can't now speak with as
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  Speaker 1: much confidence, but traditionally data conservative areas were saying no
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  Speaker 1: hang on a bit you know it wasn't uh just
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  Speaker 1: a complaint from the left but is it fair to
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  Speaker 1: say if we don't if it well no not we
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  Speaker 1: if the companies don't put up data centers in sufficient
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  Speaker 1: numbers ai slows down substantially with all the implications presumably
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  Speaker 1: of the u.s losing a race to another country possibly china.
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  Speaker 2: Maybe. I think there were already concerns, though, that there
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  Speaker 2: was perhaps some overinvestment going on in the space. Certainly
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  Speaker 2: speaking to people who've been in this industry for decades,
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  Speaker 2: the view was that we were looking at a situation
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  Speaker 2: here not dissimilar to the telecoms boom we saw 25
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  Speaker 2: years ago during the height of the dot-com bubble when
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  Speaker 2: fiber optic cables were being deployed across the Atlantic and
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  Speaker 2: the global internet was being built. Far too much investment
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  Speaker 2: went into that infrastructure that was built at the time,
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  Speaker 2: and a lot of it was written off. But that
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  Speaker 2: investment proved the foundation for the e-commerce and internet boom
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  Speaker 2: that followed over the next 20 years, that everything's been
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  Speaker 2: built on since those days. So that investment really had
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  Speaker 2: to happen to allow the boom to happen, even though
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  Speaker 2: a lot of the infrastructure was written off and investors
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  Speaker 2: lost their shirts. And I think we may see the
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  Speaker 2: same thing happening here. I think hundreds of billions of
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  Speaker 2: dollars have already been invested in data centers with commitments
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  Speaker 2: of similar amounts in the years ahead. Hundreds of billions
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  Speaker 2: of dollars every single year in these data centers. And
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  Speaker 2: a lot of people have questioned whether there's too much
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  Speaker 2: investment going on and whether the tech companies are getting
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  Speaker 2: into far too much debt. Their balance sheets are very stretched.
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  Speaker 2: They're getting into a lot of debt. and I think
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  Speaker 2: the concerns have been mounting about whether there's going to
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  Speaker 2: be a return on the investment. So, you know, even
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  Speaker 2: if the data center build-out does prove to be a
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  Speaker 2: bubble and we see a crash and a slowdown in investment,
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  Speaker 2: that infrastructure is now in the ground and will form
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  Speaker 2: the basis for the beneficial economic impact of AI, which
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  Speaker 2: I think is going to flow over the next 20
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  Speaker 2: to 30 years, and it's going to be and it's
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  Speaker 2: going to fundamentally transform the economy and society. But in
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  Speaker 2: the initial stages of every boom, it does seem that
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  Speaker 2: there is a tendency for overinvestment and a pullback at
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  Speaker 2: some point. Whether this is the pullback now, I don't know.
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  Speaker 2: I think the Democrats might be a little reluctant to
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  Speaker 2: regulate too aggressively because a lot of the American growth
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  Speaker 2: is reliant right now on this AI build-out. A lot
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  Speaker 2: of the economic growth in the US is based on it.
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  Speaker 2: And I think the Democrats, just as much as the Republicans,
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  Speaker 2: will be concerned about China, the rise of China, and
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  Speaker 2: making sure that America stays ahead. So if this is
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  Speaker 2: the bubble at its peak, and yesterday was the start
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  Speaker 2: of the pricking of the bubble, I'm not convinced.
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  Speaker 1: Thanks so much. It's going to be fascinating, not just
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  Speaker 1: in the United States, but in South Africa as well.
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  Speaker 1: For example, down In Cape Town, there's supposed to be
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  Speaker 1: the construction of a significantly large data center and there's
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  Speaker 1: pushback there as well with people asking the same kind
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  Speaker 1: of questions that people are asking in places like Kansas
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  Speaker 1: in the US and probably in other parts of the
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  Speaker 1: world as well. Give us a call on 011-883-0702-072-702-1702. Lots
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  Speaker 1: of interesting questions being asked and comments being made. about
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  Speaker 1: the local government elections. We'd love to hear your thoughts.
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  Speaker 2: 072702 1702.