Trillions At Risk -AI Data Center Boom Faces a Major New Threat After Democrats Sweep Congress

[00:00:00] Speaker 1: Well, I think the next major threat to America's AI infrastructure boom just arrived at the ballot box. The financial assumptions supporting hundreds of billions of dollars, probably trillions in AI investment may have just encountered a political obstacle that you have to understand money alone cannot overcome. And I think the consequences could be enormous, not just for the stock market, but for the lenders, the credit markets, and of course, the broader economy. We're talking about, again, billions of dollars in data center construction, heavily leveraged developers, private credit lenders, and some of the largest technology companies in the world, and also the ones that are right now keeping the stock market, or at least big portions of it, you know, above water. So following last night's Democratic sweep of Congress, both the House and the Senate, and in addition, major gubernatorial races across the country and victories there, investment firm Needham is warning this morning that a hostile regulatory environment for new data center construction is now unfolding. According to Goldman Sachs, potential restrictions or state-level moratorium could affect approximately 45% of planned U.S. data center capacity expansion. And Jeffries previously identified 13.1 gigawatts of announced projects in Texas alone as potentially exposed to the outcome of the governor's race. So this has just shifted now, you know, from just a political story also into a major financing story. It's going to have huge implications down the road. According to research from Semi Analysis, the United States is projected to add 62.2 gigawatts of data center capacity in 2028. But yesterday, the voters elected governors who support restricting or temporarily halting construction in some of the most important states for this expansion. We're talking about Texas and Georgia and Ohio. This is how a political decision, okay, is going to shift into and become a major credit crisis event. The most important state, obviously, we want to talk about is Texas. Semi Analysis says Texas represents close to 30% of projected U.S. data center additions in 2028. And yesterday, Democrat Gina, I think it's Hina Hossa, defeated three-term Republican Governor Greg Abbott. And she has supported maintaining a moratorium on data center construction until Texas adopts legislation addressing electricity costs, water consumption, environmental protections, and property rights. And Texas wasn't the only state where the political environment shifted massively last night. In Georgia, Democrat Keisha Lance Bottoms won the governorship, ending decades of Republican control. She has called for a statewide pause on new data center development. Georgia is one of America's largest and fastest-growing data center markets. Let's talk about Ohio. In Ohio, Democrat Amy Acton won the governorship, and she supports a conditional moratorium requiring developers to satisfy tougher standards, including paying the infrastructure costs their projects imposed on the utility companies. And in Pennsylvania, Governor Josh Shapiro won re-election after taking steps to remove data centers from expedited permitting and required developers to shoulder more of their electricity costs. Don't forget, please hit the subscribe button for me as we keep growing the channel. I really appreciate it. According to Washington Post, voters in at least 29 jurisdictions also approved bans or restrictions on data center development. In Ohio, there were 10 local measures supported by Conserve Ohio that passed. In Joliet Township, Illinois, nearly 80% of voters supported restrictions. In Hubbard, Ohio, more than three-quarters of voters backed limits on data center development. So understand these hyperscalers and these equipment manufacturers, they're investing, I should actually say they're borrowing billions of dollars because they expect these facilities, it's all their assumptions, to produce revenue and justify the valuations that investors are assigning to them today. And that's why despite a huge rally, folks, if you're watching today in the stock market, Dow's up over 1,500 points, I saw last. NASDAQ's up over 500, but the companies at the center of the AI infrastructure boom are actually getting hammered. Look what's happening to the companies that are actually building out the infrastructure. IRON, HUT8, Applied Digital, Core Scientific, we're all falling. Last I checked, between 5% and 10% today. Video was down 1.5%. Intel and Micron were also taking a hit. So this is Wall Street, understand, recognizing an entirely new threat to the artificial intelligence boom. If completion dates move into 2029 or 2030, the revenue assumptions change and financing assumptions change. Eventually, what has to happen is the valuations have to change. There's an important distinction between companies that already own operational facilities, data centers, and those depending on the future of construction. Restrictions on new supply could make existing facilities possibly even more valuable. Okay, but developers with unfinished projects, substantial debt loads, and aggressive construction schedules are going to face increasing pressures, at least in these major jurisdictions. Here's what I believe are the most important developments to watch. Number one, whether companies begin revising their construction schedules. Right? Number two, whether lenders demand additional collateral. Number three, whether financing costs increase. Number four, whether hyperscalers revise their capital expenditure plans. That's a big one to watch because that will impact their share prices. Now, whether projects previously expected to begin generating revenue, let's say in 2028, are pushed into later years. The AI boom has operated, understand folks, on a fundamental assumption that if enough money is available, it can simply get built. But yesterday's results have just force fed, I think, a reality that money alone will not guarantee that this actually can happen. You don't have to cancel the AI boom, you know, on a mass scale to completely wreck the financial assumptions. I think that probably just happened. Okay, you only have to make it more expensive, more difficult, or slower than the investors expected. If those projects are delayed, if they are, which it looks like they're going to be, the consequences extend far beyond just the companies building them. They reach the private credit lenders, their financing construction, the utilities expanding electrical infrastructure, and the technology companies expecting those facilities to support their future growth. Texas, Georgia, Ohio, okay. Three states central to America's expanding data center infrastructure, okay. And the incoming governors have supported additional restrictions on data center development. Okay. And when billions of dollars that have already been committed to projects depend on future construction taking place on specific time frames and timelines, delaying those projects will threaten the economics of the entire investment. So, I think that wall of worry has just arrived. I'll keep covering this story. I've been covering data centers now on the show for quite a long time, but this is a big thing. I appreciate you guys watching, subscribing to the channel, liking the videos for me, weigh in, giving me your thoughts. That being said, I'll talk to you all soon. Bye.