Chart of the Week: Changes

The AI boom will continue, while tighter political and physical constraints should shift value toward existing computing capacity and enabling infrastructure.

• Technology and AI infrastructure stocks sold off after Democrats won sweeping victories in the US midterm elections, as investors feared tighter regulation of data-centre construction.
• The authors argue that regulation may raise costs and extend timelines, while data centres will continue to be built because demand for AI processing remains strong.
• Data-centre capacity is measured in megawatts and gigawatts because electricity availability and grid connections have become the main physical constraint on development.
• Texas accounts for around 30% of US data centres under construction, while Democratic governor-elect Gina Hinojosa campaigned for a temporary pause on new approvals to strengthen protections for local communities.
• The pullback was also affected by news concerning Nvidia chief executive Jensen Huang, while the authors see potential beneficiaries in existing data-centre owners, cloud providers, power generation, electricity grids, cooling, electrical equipment, engineering and construction.

Takeaway: Investors should retain exposure to the AI theme while broadening beyond the most obvious technology winners, since higher infrastructure costs and longer approval timelines could increase the value of existing computing capacity and supporting industries.