MW What could save the markets from AI Armageddon? Populist backlash - and it's already started.
By Barbara Kollmeyer
Jefferies analyst says the noise is growing from unhappy Americans and politicians
Protests against data centers are mounting. Could they save the stock market too?
You know you're living in interesting times when a viral Substack post moves markets - albeit one already jittery from AI disruption worries. While stocks are set for a small bounce Tuesday, we'll also hear from Anthropic about new products that could shake the Earth again.
Our call of the day from strategists at Jefferies say what's needed to cool down the AI scare trade and boost markets right now is a good old "public backlash." And they say that's already underway.
"The ongoing sell-off in software and financials largely assumes there willbe no guardrails around AI," a Jefferies team by Aniket Shah told clients in a note. "Potential guardrails around AI, which could be a bearish scenario for Big Tech, could prove bullish for the broader market."
Shah and his team say there's plenty of evidence of a pushback building. They note rapid data center expansion has been being blamed for rising power prices across some states and concerns over environmental issues, noise driving wildlife away and giant humming fans irritating residents.
Building a case as to why AI backlash could become a force, the strategists pointed to a Gallup survey last year that revealed 80% of Americans want AI guardrails, even if it slows innovation. A Pew study last October showed Americans were more worried about AI than citizens in other other major economies.
What those surveys suggest is "lower U.S. tolerance for perceived AI downsides, raising the likelihood of stricter guardrails, disclosure requirements, and enforcement actions-especially ahead of the midterm elections."
All top five states with the biggest number of data centers have "introduced or enacted some restrictions" on those facilities, with 25 projects cancelled or postponed in January, they said.
U.S. states introduced more than 1,200 AI-related bills in 2025, and 874 of those remain active or under consideration - 40% are focused on private-sector use, they said.
"Taken together, these trends suggested that state-level constraints are likely to play a material role in shaping AI deployment and infrastructure buildout in the near term," said Shah and his team.
While President Donald Trump signed an executive order to block states' ability to regulate AI in December, Jefferies strategists say neither side of the political aisle has shown much appetite for such a restriction. A moratorium on state AI was removed from the "One Big Beautiful Bill" act by a 99 to 1 Senate vote last year, they noted.
"We view any attempt to implement an effective federal AI moratorium as likely to face significant state resistance as well as public backlash," said the Jefferies analysts.
The markets
U.S. stock futures (ES00) (YM00) (NQ00) are trading higher after Monday's slump.
Key asset performance Last 5d 1m YTD 1y S&P 500 6837.75 0.02% -1.62% -0.11% 14.28% Nasdaq Composite 22,627.27 0.36% -4.13% -2.64% 17.32% 10-year Treasury 4.044 -2.00 -20.60 -12.80 -25.70 Gold 5190.9 2.51% 3.72% 19.82% 74.84% Oil 66.77 6.30% 9.76% 16.30% -5.84% Data: MarketWatch. Treasury yields change expressed in basis points
The buzz
Anthropic will discuss its AI enterprise agents at 9:30 a.m.
Workday (WDAY), a key player in the hard-hit software sector, will report after the bell, along with HP $(HPQ)$.
Home Depot stock rose as the home-improvement retailer's comparable-store sales edged higher in the fourth quarter.
Shares of Hims & Hers $(HIMS)$ are sliding after a disappointing profit forecast from the wellness platform.
Apple $(AAPL)$ said it will bring production of the Mac mini to the U.S. for the first time.
The S&P Case-Shiller 20-city home price index is due at 9 a.m., followed by consumer confidence at 10 a.m. Chicago Fed Pres. Austan Goolsbee is due to speak at 8 a.m., followed by Atlanta Fed. Pres Raphael Bostic at 9 a.m.. Fed Gov. Lisa Cook will speak about the impact of artificial intelligence on productivity, while Gov. Christopher Waller will speak for a second straight day.
President Donald Trump is expected to address the economy and affordability in his State of the Union address, due to start around 9 p.m.
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The chart
The chart from Barron's newsletter editor Josh Schafer, flagged by @TheDailyChartbook, shows the performance of publicly traded companies mentioned in the Citrini article on AI disruption Monday. The best-to-worst list of companies on the right side shows how badly some were hit, such as Asana $(ASAN)$, KKR $(KKR)$ and Capital One $(COF)$.
Top tickers
These were the top-searched tickers on MarketWatch as of 6 a.m.:
Ticker Security name NVDA Nvidia TSLA Tesla INFY Infosys GME GameStop MSFT Microsoft AMZN Amazon NVO Novo Nordisk PLTR Palantir AAPL Apple NIO NIO
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BEYOND THE NEWSROOM
MarketWatch Picks: My situation 'seems hopeless since I live in California.' I'm 41 and make $90K. If my parents give me $150K, can I afford a house?
-Barbara Kollmeyer
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February 24, 2026 07:01 ET (12:01 GMT)
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