Good morning. What do the results of the U.S. midterms mean for financial officers? As the Democratic Party gains control of both houses of Congress, companies may face stricter scrutiny over investments in artificial intelligence and data center construction. However, the broader financing challenges faced by financial managers go far beyond changes in the political landscape.

EY-Parthenon, the person in charge of corporate financing for global and American companies, Josh Putnam said to me: "By 2027, it is expected that borrowing costs will remain high." Regardless of which political party controls Congress, the financing environment may continue to be volatile.

Putnam says that expanding deficits, strong capital demands, inflationary fluctuations, and policy uncertainties are putting pressure on long-term interest rates. Therefore, discipline in capital allocation, debt management, and investment decisions is becoming increasingly important for financial officers.

His suggestion is to conduct stress tests on the investment threshold, assess the debt maturity situation, and maintain the flexibility of the balance sheet. He said that companies must figure out which investments can generate returns higher than the cost of capital, and reallocate resources when that is not possible.

Prepare for fiscal uncertainty

A political deadlock may increase risks, but taken individually, it does not necessarily mean that long-term borrowing costs will rise.

EY-Parthenon Chief Economist Gregory Daco stated that a divided government "will not automatically drive up maturity premiums." However, recurring budget disputes, the risk of a government shutdown, pressure on the debt ceiling, and greater fiscal uncertainties "will intensify upward pressures."

Daco It is recommended to test investments under a range of financing cost scenarios and maintain a threshold rate of return that reflects higher and more volatile capital costs.

However, for businesses, the risks are not limited to long-term interest rates alone. Political uncertainties can also affect access to credit and the cost of short-term financing.

A finance lecturer at the Questrom School of Business at Boston University and a former reviewer at the Federal Reserve Bank of Boston, Mark Williams, stated: "The market will react to uncertainty, and higher costs will be incurred whether the risk comes from Washington or Wall Street."

Williams said that banks will respond to the rising risks by tightening credit terms and reducing lending. "A legislative deadlock can lead to volatile financing cycles and may cause short-term borrowing costs to soar," he explained. Enterprises that rely on commercial paper, a short-term corporate financing tool, should consider longer-term financing methods, diversify their financing sources, and obtain credit lines from multiple banks.

Since a divided government increases the risk of a government shutdown, which could delay the release of economic data, Williams said that CFO should also establish internal models to fill these gaps. At the same time, government contractors should assess how potential payment delays will affect their cash flows.

AI Rising financing costs amid the craze

With rising financing costs and increased regulatory uncertainty, investments in artificial intelligence may face particularly stringent financial scrutiny.

On Tuesday, voters sent a clear signal regarding the construction of AI: the cost of data centers has now become a political issue. According to Fortune, candidates from both parties who used rising electricity costs as a campaign issue won key elections, and at least 14 towns in Ohio have passed measures to restrict the development of data centers.

Williams said that these results highlight the increasing regulatory and political uncertainties faced by AI and data center developers, which could drive up costs and make project financing more complex. He stated that private credit funds, as major lenders in this field, will demand higher interest rates, and as yields rise, the prices of outstanding AI bonds may fall.

However, Williams pointed out that before the election, the market was already re-evaluating the risks associated with AI. He suggested returning to the fundamentals of corporate financing, including adopting more conservative net present value assumptions, conducting multi-variable scenario analyses, and performing stress tests for higher borrowing costs and stricter loan agreements.

Daco also noticed the political aspect. As affordability becomes a core issue in elections, he said, 'If families see that AI investments drive up electricity costs, while the benefits remain concentrated in the hands of a few, a backlash is likely to occur.'

Daco indicates that CFO should prioritize projects that can bring measurable improvements in productivity, fully incorporate these improvements into the costs of electricity and infrastructure, and match technological investments with investments in employees and skills.

In the next economic cycle, the required financial discipline will still be of paramount importance. As Putnam says, "Companies that can prove they are capable of effectively managing their capital will be best positioned to pursue growth."

Sheryl Estrada

Leaderboard

Fortune 500 Power Moves

Brandon Sewell has been promoted to Executive Vice President and Chief Financial Officer of Sysco Corporation (rank 55), effective from November 1st. Sewell has been serving as the interim CFO since March 2026. He joined Sysco in 2014 and has held a series of progressively senior financial leadership positions within the company. Before being appointed as the interim CFO, Sewell served as Senior Vice President of Sysco for the U.S. business, which is the company's largest operational segment. Prior to that, he led the global financial planning and analysis functions at Sysco and also held financial leadership roles in the company's supply chain and procurement organizations.

Fortune Weekly " Fortune 500 Power Moves " column tracks changes in the senior management of Fortune 500 companies – you can view the latest issue.

More notable personnel changes

Toast ( NYSE : TOST ) The President and CFO Elena Gomez has decided to leave her current position at the end of this calendar year. Gomez has served at Toast for five and a half years; it is a company specializing in catering management software and technology. She led the company through the IPO in 2021 and played a key role during a period of significant growth and improved profitability for the company. Toast The Senior Vice President and Chief Financial Officer, Michael Senno, will take over from CFO effective January 1st; thereafter, Gomez will serve as a consultant in a non-executive capacity until July 2, 2027.

Michael Koch has been appointed as the Senior Vice President and CFO of Lindsay Corporation ( NYSE : LNN ), effective from November 9th. Koch will replace Brett Coburn, who has served as the interim Co-Vice President and Chief Financial Officer of CFO since September, as well as Vice President and Head of Business Finance Alicia Pfeifer; both individuals will continue to hold their current positions. Koch possesses nearly 30 years of financial experience. He currently holds the role of Senior Vice President of Finance for the StandardAero Business Engine Services division, also known as CFO. Prior to this, Koch held several financial leadership positions at Universal Electronics, with his most recent role being that of Senior Vice President of Finance.

Big Deal

According to Gartner and Inc, when companies prioritize layoffs over understanding the job requirements necessary to implement their strategies, layoffs driven by AI may result in a costly labor shortage.

The company predicts that by 2029, if companies fail to thoroughly reform their labor force planning, 30% of the employees who will be replaced by AI will be rehired—often at a higher cost. A survey conducted in July by Gartner among 297 chief human resources officers found that only 19% of organizations have effective planning practices that take into account work changes, AI impacts, and business priorities.

Gartner It is recommended to adopt a strategy-first approach: identify key capabilities, predict future workloads, assess human resources and AI production capacity, and evaluate labor investments based on cost, risk, and speed. The core conclusion is that companies should determine the best combination of people and technology required to achieve results, rather than primarily viewing AI adoption as an opportunity for layoffs.

Going deeper

Anthropic has committed to investing $895.4 billion in data centers by 2045, and its suppliers are helping to provide financing for these purchases. Wen Shao of Fortune reported that if Anthropic breaches the contract, Broadcom has agreed to provide a guarantee for a $63 billion equipment transaction. An expert warned that such transactions could spread the impact of a single demand shock across multiple balance sheets. Read more.

Overheard

The reality is that, in the end, it is the American people who decide where this country will go.

The founder of the election prediction websites Race, to, the, and White House Logan Phillips stated in an interview with Fortune.