New regulatory limits on artificial intelligence could create headwinds for major technology companies but may ultimately “could prove bullish for the broader market,” according to Jefferies analysts in a recent report.
The analysts argued that the recent declines seen in software and financial stocks “largely assumes there will be no guardrails around AI.” However, rising public anxiety about the technology may encourage policymakers to introduce tighter oversight, potentially benefiting the wider equity market even if it weighs on large-cap tech names.
Jefferies highlighted survey data indicating that U.S. consumers express greater concern about AI than those in other leading economies. The report noted that most Americans favor safeguards and regulation rather than rapid, unrestricted development, a trend the analysts believe increases the chances of stricter rules, expanded disclosure obligations and stronger enforcement — particularly as U.S. midterm elections approach.
Momentum is already building at the state level. The report said more than 1,200 pieces of AI-related legislation were introduced across U.S. states in 2025, with 874 proposals still active or under review.
Around 40% of these measures target private-sector applications, reflecting “broad and sustained state activism,” the analysts said.
Jefferies also observed that the five U.S. states hosting the largest concentrations of data centers have each proposed or implemented some form of limitation on new developments.
“Taken together, these trends suggest that state-level constraints are likely to play a material role in shaping AI deployment and infrastructure buildout in the near term,” the analysts wrote.
At the federal level, however, the analysts see little momentum for sweeping nationwide intervention. Although the Trump administration introduced an executive order addressing AI policy in December 2025, Jefferies said a federal AI moratorium remains “unpopular among state lawmakers,” reducing the likelihood of it moving forward.
The firm added that the U.S. Senate removed language supporting such a moratorium from the House’s “One Big Beautiful Bill” by a 99-to-1 vote.