The midterm elections have led to increased scrutiny of data center projects, particularly with Democratic victories suggesting tighter regulations. For instance, Texas governor-elect Gina Hinojosa has proposed a moratorium on new data center permits, which could delay future projects.
Following the election results, shares of Microsoft and Amazon rose over 6%, reflecting investor confidence in their existing capacity, while AI infrastructure provider CoreWeave saw a decline of around 10%.
Analysts from JPMorgan noted that widening borrowing spreads for neocloud companies are making it more expensive for them to finance new projects compared to hyperscalers like Microsoft and Amazon, which benefit from diversified revenue streams. This bifurcation in equity performance highlights the increasing value of existing data center capacity amid supply constraints.
Investment bank BMI warned that a slowdown in data center construction could lead to a significant decline in overall investment, particularly affecting projects planned for 2028, which face greater regulatory uncertainty.
Additionally, tightening credit markets have raised concerns about financing for AI infrastructure, with CoreWeave's credit default swap spread indicating rising risks for investors. Overall, the potential for stricter regulations could create a challenging environment for smaller players in the AI sector, while larger firms may capitalize on these conditions