This is Balance of Power, live from Washington, D.C. Tonight, AI reckoning. The Nasdaq 100 plunging over 6% in its worst day since March of 2020, wiping out $2.3 trillion in market value. The SOX index tumbling on worries about tighter Democratic scrutiny over AI. A prominent tech bull -- to next year. We will discuss what it means for the AI buildout with Decision Tree Research founder Gregory Allen. Plus, eyeing the exits. Bloomberg reporting says Secretary of State Marco Rubio is considering leaving the Trump administration, fueling fresh speculation about a potential presidential run. The administration pushing back on that report. We have the details coming up. It is the agenda: the Democrats mapping out their priorities for the next two years as they prepare to take control of Congress. A member of the House Oversight Committee joins us on what his party plans to do with the new majority. From Bloomberg's Washington, D.C. studios to our TV and internet audiences worldwide, welcome to Balance of Power. I am Joe Mathieu alongside Kailey Leinz.
AI stocks plunged, the S&P 500 seeing its worst day since the Liberation Day tariff shock of last year. Chip stocks plunging the most since 2020 as investors reckoned with what a Democratic sweep of Congress could mean for the data center boom that has powered the AI trade. Joining us for more is Romaine Bostick. It's not just the sweep of Congress, but state and local governments as well. The market viewing this very differently than yesterday.
The second part of your statement is there is so much focus on the House and the Senate, but it is what is going on in the state legislatures and governors' mansions, as well as the idea that you had dozens of proposals on ballots actually asking for some sort of reining in of the data center buildout. Charles Schwab put it best: this is about this idea that we've been on an AI autobahn for the last four years. October 2022, we saw ChatGPT and all of that, and it's been up to the races. Now you have the real prospect for Wall Street that there are actually going to be some speed limit signs put up and some cops on the road to catch those speeders, and that is the fear -- that you have people who have made investments, whether it is in the companies themselves or in the secondary market, predicated on this idea of this investment being unfettered and allowed to just run wild, and there is this realization that it's probably not going to be the case.
Some valuations crashing back to earth, but outside of equities, how are we seeing this reflected across other asset classes?
The most extreme move we saw in Treasuries. We saw a lot of buying, particularly with the two-year yield falling. We saw that yesterday as well. When you think about are people seeking out havens, they didn't go into precious metals. I'm told sometimes Bitcoin is supposed to be a haven, but that was down as well. You did see buying in the yen, a little less than the dollar. I think this is more about a bit of a pause, people moving to the sidelines. We spoke with Tony Wong over at T. Rowe Price, and he says the idea is let's move to the sidelines and figure out what is going to happen. Congress does not get sworn in until January. Most of these state legislatures don't take power until January next.
Romaine Bostick, thank you. Wall Street is making bets on what it thinks will happen with the AI investment, but we want to talk with an expert about the impact that new regulations could actually have on compute capacity and overall growth in the industry. We welcome back Gregory Allen, founder and CEO of Decision Tree. This is a full-on panic on Wall Street. You've been following results, and you look at a state like Texas -- does the emergence of scrutiny actually change the AI thesis that investors have been chasing for a couple of years?
There are a lot of numbers circulating in the conversation, like the idea that in 40 state ballot initiatives, the anti-AI position won in all but one of them. That sounds stunning until you find out that 18 of those were in Ohio. So we are counting the same thing again and again. The reality is, the governor-elect of Texas has said to the folks who already have a shovel in the ground, she's not going to get in the way. This is not about the planned AI data center buildout that is already underway for the next 18 months. That is going to continue and bring tens of gigawatts of new AI compute capacity online. When the models come online, the performance they are going to deliver is going to be jaw-dropping, and people are going to be clamoring. Why are we building this capacity? It is because the revenue of these companies is constrained by supply, their ability to actually serve. The voters have said that they don't like the data center buildout under the terms with which it was proceeding -- tax breaks for data center construction, NDAs, some politicians can't talk about the deals they cut. Those are things that are all addressable. And if there is one thing the $10 trillion AI infrastructure has, it's a lot of money.
You are seeing through this. You don't see data centers crossing the border to Mexico or going to the UAE or even space anytime soon. There are going to be states that make a home for AI data centers, including those looking at them with a different lens.
What you have to separate is what is already permitted, what is already underway, and that stuff is overwhelmingly skewed -- tens of gigawatts of new capacity, already a shovel in the ground somewhere. 2027 and 2028 are going to be astonishing growth in AI compute capacity no matter what happens. What the governors-elect are talking about is the future and what are the terms of that new construction? Are they going to be tax breaks to attract construction? Are they going to be building with union labor? Are there going to be requirements that the companies guarantee nobody's power bills are going to go up? If you address those issues -- and that's just money -- then the governors don't have any remaining complaints. One thing to think about is AI polls quite negatively right now, but a lot of the polling is tied up in other issues like the connection between AI and the cost of living, power bills going up, connections between AI and corruption, the shocking amounts of campaign contributions. When you start redeploying that money to communities, to bring them benefits rather than requesting tax breaks, you might see the polling flip. We've seen the data center industry weather major cost increases before. 12 months ago, a gigawatt data center would cost you something like $36 billion. Just from memory chip prices alone, that's up to $41 billion a gigawatt. So this is an industry that has an astonishing amount of demand, an astonishing amount of capacity underway, and an ability to weather pricing increases. They can afford to make the communities a little more comfortable.
The conversation we were having was if this was getting bubble-ish. Maybe there was overdoing it on the infrastructure buildout. Is there a chance that if things slow down, we could actually reach more of an equilibrium between the demand and the buildout of the infrastructure?
Yes, and I think the previous commentator you had -- that mostly applies to the starting construction of what will begin to come online in 2028 and beyond. The market is going to see the biggest results of the bet that was made in 2025. That's what's coming online now and over the next 12 months. From everything I'm seeing in terms of the performance of these AI models, their relevance to different sectors of the economy is growing all the time. The coders experienced it first, but now white-collar professionals are experiencing it. So many different industries are about to get a taste of just how much AI can do for them, and that might shift opinions on willingness to spend, return on investment, and all of this. Seeing how things are going to develop, that could affect the valuations today, but what we should expect 12 months from now is an AI buildout that is powering AI models that are so much more capable and relevant to so many different sectors of the economy.
What do you make of the incumbency argument? This was driving shares of hyperscalers higher. They already have the data centers and the permits, and they might even have a shovel in the ground, as opposed to any other emerging companies or new technologies who will have to cross a big moat. Everyone is being thrown out today. Is there an argument to be made?
As Warren Buffett famously said, it is only when the tide goes out you see who is swimming naked. Clean up. They can identify who are these companies, who maybe had some good permits they acquired, maybe need some early investments, but are now adrift, and the hyperscalers can acquire that capacity at a fraction of what they had to pay not that long ago. So this could be a move from strength to strength.
I want to ask about beyond just the question around data center infrastructure -- guardrails around the technology itself. We've already seen some Democrats previewing this, including from California, who was just reelected on Tuesday. Take a listen.
We will hold public hearings on AI. We will pass legislation for guardrails on AI, specifically data centers. We see huge pushback from the American people against the out-of-control AI industry. We need some reasonable guardrails.
Putting aside the data center guardrails, on the idea of AI guardrails, even if a Democratic Congress would like to pursue those, how much would you expect that would be met by what we've seen?
There are two things you can point to. The first of which is what are conservative advocacy groups saying? Many of them are saying that it would have to be insane to think that the Republican Party did not need to pivot in its party platform with regards to AI safety and regulation. If the Trump White House is unwilling to change its position, I think there is going to be plenty of Republican senators and members of Congress willing to break with this administration. Obviously, Trump is a lame duck, and these folks are going to be thinking about their 2028 election prospects. The second thing I would say is, in terms of what regulation might look like, don't be fooled by the press-release-style legislation proposals. There are folks who are saying ban intelligence now, construction -- none of that really has any chance of passing. Whatever legislation is going to become law in the next two years has to survive 60 votes to beat the filibuster in the Senate and potentially has to survive a White House veto. We've seen one very important development out of the White House Office of Science and Technology Policy today. They announced there was new regulations on DNA synthesis machines. This is a regulation that many AI safety advocates, myself included, have been calling for for years because it reduces the risk of AI lowering the barriers to entry for developing a bioweapon or a pathogen. So the White House, you could argue, is already making a pivot and adopting by executive action new safety regulations, and it could signal they are willing to talk.
Gregory Allen, live in Washington. Coming up, one of the president's closest advisers is weighing his future at a pivotal moment for the White House. What Marco Rubio's next move could mean for Trump's final two years and the future of the Republican Party. That's next on Balance of Power.
It is Balance of Power on Bloomberg TV and radio. Alongside Kailey Leinz, I'm Joe Mathieu. A potential shakeup inside the Trump administration making headlines as fallout deepens from Republican midterm losses. Secretary of State Marco Rubio is considering an exit. The State Department strongly denying Bloomberg's reporting. Major decisions ahead at home and abroad, and then there is the matter of 2028. Eric Martin has traveled extensively with Secretary Rubio, and we are joined by Jeff Mason who is on the North Lawn. Eric, I will start with you. You share the byline on this piece, and you know Rubio's intentions as well as anyone. Is he out?
I want to make clear the limits of what our reporting says, which is that this is something he is considering but has not taken any decisions yet, and there is no clear timeline. This isn't necessarily, even if he were to leave, something that would happen next week, this month. This is just the conversation we know is happening in the White House as to when he might leave and discussing the possibility, which is something he has repeatedly denied in recent months as far as a lot of speculation. The president saying either Vice President Vance or Secretary Rubio would be the best candidate for president. Secretary Rubio has always batted down that speculation, and our reporting is not that he would be leaving to pursue the presidency in 2028. He's talked in the past about different private-sector opportunities. He has talked perhaps half-seriously about becoming NFL commissioner, which is a job Roger Goodell has nailed down for the next several years. He has spoken in the past about things he would like to do in the private sector, and that is part of the consideration -- what opportunities might be available there, not necessarily directly connecting a departure to 2028.
Even if he decided he wanted to pursue those opportunities, would Trump let him go?
I don't think Trump is eager to see Secretary Rubio go. The president absolutely likes him. I was on the campaign trail with him, and Secretary Rubio tagged along in his capacity as national security adviser, and the president brought him out on stage and he addressed the crowd very briefly, but he got a big ovation, and I think the president liked that, and that would probably also fuel some speculation about what the secretary's intentions are for the next cycle. All of that said, and Eric mentioned there is no real timeframe, but if the secretary were to leave -- and this applies to anyone in President Trump's cabinet right now -- I spoke to a former White House official who said there will be pressure on folks who want to depart to do so soon because the Republicans only have control of the Senate until the end of December.
What did you make of this essay from J.D. Vance yesterday, followed on by Ted Cruz, and it kind of seems like we have Hegseth in the mix, everyone is thinking about something. How long is his chief of staff Susie Wiles going to stay?
They have a lot to think about after Tuesday night, and what J.D. Vance did yesterday was what looked like a first step in creating some distance between himself and the president, which is probably politically very smart given how much of a whacking the Republicans took in the election. That said, the president also gave some space for it when asked about the vice president's post yesterday. The president said he more or less agreed with it. As to your other questions, I think there is a lot of up-in-the-air-ness, if I can make that a noun, about who could leave. There has been a lot of speculation about Susie Wiles leaving after two years. Two years is a pretty long stretch for that job. That said, she has also indicated that she desires to stay or wants to stay. The president has also suggested he doesn't expect to have a big overhaul, which would also be a little bit surprising given that after the kind of results you saw Tuesday night, the president might be expected to try to make some changes, but that doesn't appear to be his goal right now. We will see if others in the cabinet view it the same way.
To the point Jeff was making, he might have a short window if he wants the cooperation of a Republican-controlled Senate. If the need arises to name a new Secretary of State, do we have any idea of a short list?
We really don't. That's not something we have really dug into at this point. It has really been in the last 48 hours we've heard from our sources about this thinking from Secretary Rubio or this consideration. Secretary Rubio is, among White House staff and Republican donors, easily one of the most popular, if not the most popular, person right now. So when you are looking at some of what he brings to the table, if he should run in 2028, as some people around him, donors and others, have been trying to encourage him, having the first Hispanic president potentially, when you look at the losses among Hispanic voters in this election, the fact that every district that borders Mexico, for instance, now elected a Democrat to the House of Representatives, all of the things Secretary Rubio brings beyond his expertise and his competence, which people have cited in this administration, particularly that potential is something that may be also an attraction for Republicans as they figure out how to dig out of this landslide election loss.
When you consider jobs unfinished, I wonder how this might frame the secretary as he's looking at timelines, at a window for 2028 or something else. He leaves to go to war in Iran going. He's also the national security adviser, and he's got his eyes on Cuba. Would that be his parting shot?
That certainly is a counterpoint to the consideration about leaving -- the things he still wants to achieve. Venezuela is widely seen as a foreign policy success in terms of removing Nicolas Maduro. People on both sides of the aisle, even Democrats who don't like the way it was done, saying it's a good thing Maduro is gone. So the commitment to seeing through the democratization, the return to electoral democracy in Venezuela, the potential for changes in Cuba -- two issues we know the secretary cares about deeply -- those would serve as a powerful counterpoint to consideration of potentially leaving.
We know how influential Rubio has been in the so-called Donore doctrine. Is he the one most influencing or discussing what the president wants to do next on Iran, or is it Pete Hegseth or others who might be more influential in determining the ultimate choice to consider pursuing diplomacy or kinetic action?
My first answer is that President Trump is the ultimate decider. In 2015, 2016, he said, 'I listen to myself.' I think that still applies. That doesn't mean there aren't people getting into his ear. There certainly are, and with regard to who those are, when you look at Iran, Hegseth is certainly up there. The president had a meeting where he was asked specifically about Pete Hegseth and the possibility he might leave or that he might face impeachment from the Democratic Congress next year, and the president had nothing but positive things to say about Hegseth. And certainly the secretary, or Secretary of War, has been very instrumental in the Iran war. I think Secretary Rubio probably less so, and politically that might be advantageous should he decide to put his hat in the ring, because the war, as Vice President Vance laid out this week, was surely one of the main reasons Republicans did so poorly in the election.
'Should he decide' is an operative way of phrasing it. We will see. Democrats, a whole other story. Former Obama campaign manager Jim Messina said he has already talked to 29 Democrats considering running for president, some of whom were just reelected to office Tuesday. Tuesday, which saw Democrats winning the majority, but the work is just getting started. Inside the conversation shaping the party's next chapter, coming up in this week's Deep Read. Live from Washington and New York, this is Balance of Power on Bloomberg TV and radio.
Bloomberg TV and radio. Kailey Leinz is at the world headquarters in New York. Democrats are still notching wins two days after Election Day, with Jessica Killin projected to win Colorado's fifth congressional district. She will be the first Democrat ever to represent Colorado Springs. That is how widespread the Democratic sweep has been. They are still counting the votes. Simultaneous conversation about what comes next for the party. On the Early Edition, Democratic Congresswoman Debbie Wasserman Schultz told us the clear results will shape their agenda.
Our legislative agenda is going to be driven by the message we heard loud and clear, and that these election results produced, which is that people want us to reduce their costs, whether it is groceries or gas. That majority is made up of moderate Democrats who flipped Republican districts and got so many votes from Republican constituents. Making sure that we focus on life being more affordable, that's got to be critical.
So what do you do with that majority? The question Democrats are asking, what lessons they can carry forward. The Center for American Progress Action Fund, it was called Results to Roadmap, and they brought together party leaders, strategists, campaign veterans, and Bloomberg's Mario Parker was there to cover it, and he joins us. Was this a conga line around the punch bowl, or was this a serious policy meeting?
It wasn't quite a conga line, but it was jubilant, I will say that for sure. Listening to the congresswoman, I can see that clearly the Democrats are unified in their message. That was the takeaway I got this afternoon. They mentioned cost, corruption, chaos.
It wasn't about impeachment necessarily, it was all about how they can put points on the board. Even though the president has the veto pen, how they can put up points for the American voter. Efforts, 'get caught trying' is what someone told me on the sidelines, get caught trying to help Americans.
That's different than getting something done. Get caught trying, because there is another -- there is a guy on the other end of Pennsylvania Avenue who might stand in the way.
He had a Make America Great Again again style hat with the word 'veto' on it. One of the comments Chuck Schumer had was the president does wield the veto pen. If he does want to veto any of those things, lowering costs, rooting out corruption, then voters will rebuke him once again in 2028.
Every time I ask someone, it's like Beetlejuice. Will Democrats go there, or does it depend on which Democrat you ask?
It depends on which you ask.
I'm guessing in that room it was a no.
That was not the mood in the room today. The mood was focus on what the president has done, hold him accountable is a word they use much more than impeachment.
J.B. Pritzker in the room today. Was he working the room? Did he have new ideas?
