Are Datacenters Dead Because of Politics? LFG Daily - November 10, 2026

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The AI trade has certainly been stressed in the back half of the year. The Situational Awareness hedge fund caused the trade to soar, then dump as buying faded. Was June the peak and we’re done, or are we just doing a fairly standard test of the thesis, as is seen so often in sharp uptrends?

No doubt, concerns have increased. One big worry, last week, was the “blue tsunami” of Democrat wins, including governorships. The worry is that one of the things Democrats ran on was the idea of AI regulation, including limiting the building of datacenters. Texas is the primary state in focus, as they have the highest proportion of datacenter builds, but we also saw wins in Georgia, Ohio, and Michigan.

Additionally, where price goes, narrative tends to follow. You can get fear-mongering articles piling on. For instance, an article came out on Friday about how Microsoft (MSFT) is ending Oracle (ORCL) AI rentals. Scary, right? Details matter, though. Microsoft wants only the latest and greatest chips, and as they get older, they stop using them. In turn, Oracle has indicated they have been able to rent out their off-lease GPUs at prices roughly 20% higher than the original contract. Maybe not-so scary. It’s also worth noting all this comes from a Bloomberg story, and Microsoft declined comment, while Oracle stated the line above, which they’d already said at their investor day.

Goldman says the panic is overdone. They believe capacity through the end of 2027 is still on track. Their analyst actually raised US data center construction spending forecasts for 2028, last week, which is interesting because only about half of those projects have actually started. If no new data centers were announced from here, that would still equal six years of 2025-level spending. That would more than double current capacity.

I certainly don’t mean to say there are no worries. How solid is that 2028 growth projection, and beyond? Democrats want jobs, as well, and Musk has said at least one new Governor has already anonymously reached out to assure him. Hinojosa, the new Texas governor, has said the moratoriums shouldn’t be considered bans or cancellations, and Texas still wants to be a business-friendly state. She says that functionally, delays are a more likely outcome, something which was already true under the Republican governor.

Goldman agrees with her, saying the data center pauses are likely to be conditional and short-lived. Part of that is because, while almost all data center propositions passed, voters ranked data centers low on their list of priorities. Additionally, with federal gridlock, national data center legislation seems very unlikely. Goldman’s attitude is delays are the likely outcome, which is more likely to smooth and extend building, rather than reduce the long-term endpoint.

Outside of Democratic states, plenty of other states are happy for the business. On Thursday, when the AI trade was crashing, Alabama announced a $33B data center plan. On Friday, Google (GOOG) bought Crusoe’s Wyoming data center site The desire to build is still there, but the sites may shift. Additionally, it’s a big world out there. Texas politics doesn’t affect Google’s burgeoning AI business in Malaysia, for instance.

You can also say original expectations were too aggressive. Remember all the talk about how there wasn’t enough copper or power capacity around to actually build all these data centers? Were the earlier projections of continued explosive growth ever realistic? While the “blue tsunami” was bigger than expected, it wasn’t unexpected. We’ve been pricing in trouble for a while.

What we can say is that AI investment and interest are staying very high. For example, GPU rental rates continue to climb, tech multiples continue to go down as earnings soar, and deals continue to get done. The details and timing have become cloudier. That matters, as it increases costs and may cause some cancellations. This train seems unlikely to stop, but some of the individual cars could be in trouble if they can’t handle the volatility.

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