Nov 5 (Reuters) – Democratic victories in key data-center states such as Texas and Georgia have fueled expectations of tighter AI oversight, while investors also worry that a potential extension of Texas’ data-center permit freeze could delay projects, adding to scrutiny over the sector’s hefty spending.
The states where Democrats could restrict data-center development account for roughly 45% of planned US capacity, with Texas accounting for about 25%, according to Goldman Sachs.
Here is a list of companies that could be impacted by a potential slowdown of the data-center buildout:
POTENTIAL LOSERS:
DATA-CENTER INFRASTRUCTURE COMPANIES
Data-center developers with most exposure to Texas include Cipher Digital, MARA Holdings, SEI and Galaxy Digital, according to Morgan Stanley.
Morgan Stanley sees exposure to Texas, where the Democratic winner campaigned in part on a moratorium on data-center development, as one of the primary risks for companies that are based in or have active projects in the state.
POWER GENERATORS AND EQUIPMENT COMPANIES
Power companies that supply to the rapidly expanding data-center operations could face an impact, especially those with substantial exposure in Texas, Ohio, Pennsylvania and Georgia.
Vistra, NRG Energy, Constellation Energy and Talen Energy are among the power companies that J.P.Morgan expects could come under pressure from project delays.
“Most of these states have not placed an outright ban on data-center development, but any new projects are expected to have higher hurdles for approval, giving approved projects a significant advantage,” analysts at J.P.Morgan said.
According to Morgan Stanley, gas engine manufacturer Innio looks the most exposed to Texas and slower bookings.
Morgan Stanley expects underperformance across the power equipment group, but sees limited impact on GE Vernova due to its diversified customer base and regional exposure.
NEOCLOUD COMPANIES
Oracle and CoreWeave are among the neocloud companies that could be impacted by possible construction delays or moratoriums, according to Baird Equity Research.
“That said, we think recent underperformance of the neocloud group has priced in substantial, though clearly not all risk,” Baird analysts said.
POTENTIAL BENEFICIARIES:
HYPERSCALERS
Hyperscalers such as Amazon, Microsoft and Alphabet could prove resilient with their diversified exposure and greater resources.
For bigger companies, analysts have said a slowdown in new data-center construction could not only ease cash flow concerns, but also raise the value of capacity they already own or lease as new project approvals could become harder to secure.
UTILITIES
Data-center developers with less Texas exposure such as Applied Digital and TeraWulf could be more insulated than peers, Morgan Stanley analysts said.
They also expect investors to shift to more defensive utilities such as Ameren, Consolidated Edison and Duke Energy.
(Reporting by Joel Jose, Kanchana Chakravarty, Medha Singh and Prathik Jayaprakash in Bengaluru; compiled by Sruthi Shankar; Editing by Shilpi Majumdar)
