Data center investors are overlooking the political risks
2 hours ago - Business
Data center investors are overlooking the political risks
- Dan Primack
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- The politics have turned sharply negative, often on a bipartisan basis.
- New data center restrictions, including some moratoriums and bans, have been introduced in dozens of other states.
- Even if hostilities harden, they add, there are plenty of states where new projects can be built or existing ones expanded.
- "There is a time horizon problem," explains a Wall Street executive active in the sector. "Capital is underwriting decades of demand while politics runs to the next election. Those two things at times don't reconcile easily. I wouldn't overweight or underweight any one state."
- For example, imagine that Pennsylvania Gov. Josh Shapiro runs for president. Won't he have to argue that what's good for Pennsylvanians is also good for other Americans?
- Permitting and siting are usually a municipal or state-level issues, but the federal government does have all sorts of levers that could slow the industry's roll.
- Wall Street and Silicon Valley are not the electorate. "We can't let China win the AI race" isn't a salient statement for most normies, particularly when their electricity bills keep rising.
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Illustration: Brendan Lynch/Axios
There is a growing disconnect between the business and politics of data centers.
Why it matters: Investors may be whistling past the server racks.
Zoom in: The business is booming. Public and private equities are both up and to the right — not only for actual project operators, but also for related energy and vendor plays.
State of play: New York has put a temporary moratorium on large new data center projects. Pennsylvania and Texas have implemented new regulatory roadblocks that could decrease development.
Behind the scenes: Data center investors lament the opposition, often framing it as a correctable community education issue. They also believe that much of the political pushback will dissipate after the midterm elections.
Yes, but: Local fights could get nationalized.
The bottom line: There is more than one way for an AI bubble to burst.
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