Morgan Stanley: Midterms Delay the AI Data Center Buildout Into 2029
As seen on the 24/7 Wall St. homepage on November 11, 2026.
Midterms Could Delay the AI Buildout, Not Derail It
- Texas and Ohio governors-elect propose pausing or conditioning new data center approvals; Georgia tightens scrutiny
- Roughly 5 gigawatts of US projects slip from the 2028 pipeline into 2029; 2027 construction untouched
- Hyperscaler capex outlook unchanged at about $1.6 trillion next year and $1.8 trillion in 2028
- Powering AI team sees a 44-gigawatt US power shortfall through 2028, about 38% of projected demand
Morgan Stanley is telling clients the political backlash reshapes the spending timeline: capacity additions go flat in 2028 then grow nearly 40% in 2029. The squeeze lands on equipment suppliers facing weaker 2028 orders, while best-capitalized hyperscalers and owners of already-powered facilities gain pricing leverage.
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Ariana Salvatore, Head of Public Policy Research at Morgan Stanley, said on the November 11th episode of Thoughts on the Market that the midterm results push a meaningful slice of the AI infrastructure boom a year further out than the market had priced.
The friction is concentrated at the state level, where Texas Governor-elect Hinojosa proposed pausing new data center approvals outright, Ohio Governor-elect Acton proposed a conditional moratorium, and Georgia moved toward tighter scrutiny of construction approvals and electricity infrastructure cost allocation. Morgan Stanley sees the federal government maintaining an accommodative posture, citing AI's role as national security infrastructure and the likelihood of a presidential veto on restrictive legislation.
According to Morgan Stanley colleague Cameron McVey's team, roughly 5 gigawatts of US data center projects slip from the 2028 pipeline into 2029, leaving 2027 construction largely untouched because those projects are already permitted or underway.
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Hyperscaler capital spending plans stay intact for now, but the firm's Powering AI team estimates a 44-gigawatt US power shortfall through 2028, shifting the critical bottleneck from computing equipment to actually powering the facilities.
Equipment suppliers face the risk of weaker 2028 orders, inventory buildup, and margin pressure, while the best-capitalized hyperscalers and owners of already-powered data centers are positioned to gain pricing leverage from the scarcity. New construction financing will face greater scrutiny around permitting, power availability, and execution risk.
