🌊 The blue wave washed data centers away

Perhaps the only people more dejected by Tuesday’s election results than Republican politicians are data center developers.

Data centers – the kilowatt-sucking warehouses filled with server racks and cooling equipment – were on the ballot across the country and the results were emphatic: Voters don’t like data centers. They really really don’t like data centers. 

In the 41 local races across the country where a data center moratorium, new regulations, or a specific project itself was on the ballot, voters weighed in against data centers 40 times, Semafor reports. 

Those election night results don’t come out of the blue, of course. Back in May, Gallup found that 71% of Americans opposed data center construction in their area. To put that 71% opposition figure in context, building new data centers is just about as unpopular as releasing the Epstein files is popular (75% of Americans support the latter.)

In terms of the market reaction to voters’ data center displeasure, it would be easy to look at the post election rally in the S&P 500 and Nasdaq 100 and think that meant that investors expected little to no hiccups in the AI trade, and specifically, the data center trade, to proceed with little to no hiccups while Democrats control the House and Senate. 

The Takeaway 

Looking a bit more granularly at the market reaction, that doesn’t seem to be the case. While the broad indices are indeed up, the VanEck Semiconductor ETF and the RoundHill Memory ETF – which as their names indicate, respectively track semiconductor and memory storage shares – ended the day in the red. Nvidia, Broadcom, and Marvell all tumbled. (In a sign of just how negative investor sentiment is, AMD printed strong earnings and boosted guidance and ended the day barely eking out a gain.) 

And who among the AI trade gained on the day? The hyperscalers – Amazon, Google, Meta, Microsoft – were all in the green. SpaceX was conspicuously down, as investors reassessed the downsides of Elon Musk’s close alliance with the President Trump and the failure of Musk’s interventions on behalf of the GOP in Texas’s statewide races. 

What investors are saying, in a sense, is that if right now you have an already operating data center, it just got more valuable. And if your business is selling stuff to build not-yet-existing data centers, that business just got on balance a little less profitable going forward. 

As Bloomberg’s Joe Weisenthal put it, the “[Meta Hyperion] campus in Louisiana might be able to charge some pretty high rents.”

The massive data center build out in recent years across the Sun Belt in particular was done in large part with full industry enmeshment with the national and state Republican party. That strategy will now largely be unavailable.

However, in a purely analytical way – dare we mention game theory? – despite the tables being fully turned, that strategy had a certain logic. Indeed, if you were in charge of a hyperscaler or an AI lab with an interest in seeing data centers getting built, being as close as possible to Trump and the GOP may have made sense. Assuming a blue wave was coming and there was nothing really that you could do about it, Trump and the GOP were the path to getting the most compute online while you could. Any data center that wasn’t already up and running on Monday has a lower chance of becoming operational and a longer lead time with higher costs if it does. 

The challenge that the entire data center and AI industry must now reckon with is the blue wave did indeed happen, and Democrats will (accurately!) view their anti-data center campaign messaging as key in helping them win. An industry not used to oversight or much, if any, national-level regulation will now be a key regulatory and investigation target of a party emboldened by a historic win. 

In response, OpenAI has already decided to rebrand data centers as “compute campuses.” I’d hazard to predict that won’t be enough to turn the anti-data center tide. 

— Ben Walsh

• 🏈TNF: The Jacksonville Jaguars are a surprise favorite in a Thursday night matchup against the Baltimore Ravens, thanks largely to the likely season-ending thumb injury of Baltimore’s star quarterback Lamar Jackson on Sunday. The Jags are an 83% chance to win the game, according to markets, up from 43% on Sunday morning. 

• 🏛️Government: One outcome of Tuesday’s blue wave is that markets think that a bunch of Trump administration officials are bound for the exits by the end of the year. Chief of Staff Susie Wiles jumped from a 40% to a 58% chance to depart the administration, Secretary of Defense Pete Hegseth from a 39% to 49%, and Stephen Miller from a 9% to a 25% chance to leave this year.

*Event contracts are offered through Robinhood Derivatives, LLC — probabilities referenced or sourced from KalshiEx LLC, ForecastEX, LLC or Rothera Exchange and Clearing LLC.

That’s how many rides Uber fulfilled last quarter that were booked by AI agents, The Verge reports. Yes, that’s 4 as is 1 less than five. Additionally, Uber said 500 food deliveries were booked by AI agents. The company processed 320 million transactions in the quarter. 

• Quarterly results from Lumentum, Hyperliquid, Cloudflare, Opendoor, Compass, Akamai, Lyft, Applied Optoelectronics, NuScale, Quantinuum, IonQ, Soundhound AI, Axon, and DraftKings due out postmarket.