The possibility of tighter regulation of artificial intelligence (AI) data center investment is emerging as a new variable ahead of the US midterm elections. As community opposition grows over the electricity and water demands of large-scale data center construction, observers expect gubernatorial election results could affect future infrastructure investment and permitting schedules.
According to The Wall Street Journal and Reuters on November 2, local time, Wall Street investors are watching not only changes in Congress but also the results of key gubernatorial races in the November 3 midterm elections. State and local governments have considerable authority over data center construction permits and related regulations.
Texas, Georgia and Ohio are among the states attracting particular attention. Large-scale AI data center construction plans are concentrated in these states, raising the possibility that election results could change approvals for new projects and electricity supply conditions.
According to data center market research firm Cleanview, the outcomes of 10 gubernatorial elections could affect data center investment plans totaling 67.4 gigawatts (GW), worth approximately $2.5 trillion, or approximately 3,350 trillion won. The analysis does not mean all of this investment would be halted, but suggests that project schedules and costs could change depending on the direction of regulation after the elections.
Texas is attracting the most attention. Approximately a quarter of the data center capacity scheduled to be operational in the United States by 2030 is concentrated in the state. Investment bank Jefferies assessed that approximately 13.3 GW of already announced projects could be affected if the Democratic candidate advocating a halt to new data center construction wins the gubernatorial election.
Disputes over grid pressures and water use have continued in Texas recently. Republican incumbent Governor Greg Abbott is pursuing stricter electricity and water reviews, while Democratic candidate Regina Hinojosa is calling for an immediate halt to new data center construction.
This regulatory uncertainty is also weighing on the AI infrastructure investment market. Some companies are reportedly postponing high-yield bond offerings worth billions of dollars until the policy direction becomes clearer after the elections. Delays in data center construction could disrupt financing schedules and plans to recoup investments.
However, it remains uncertain whether the midterm election results will lead to tighter data center regulation nationwide. JPMorgan said President Donald Trump would likely veto legislation limiting AI industry expansion. It also expected federal regulation would be difficult to introduce because Democrats would struggle to secure enough seats to override such a veto.
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Observers suggest that future conditions for US data center investment could be influenced more by state and local policy changes than by the federal government. Projects that have not secured new permits and electricity supplies are expected to face particularly high risks of delays and increased costs from tighter regulation.
Kevin Shea, senior equity analyst at BNY Wealth, said, "Policy uncertainty surrounding data centers will not reverse the flow of AI investment itself. However, it could disrupt project schedules and costs."
Original Korean article: ZDNet Korea
English brief by Korea Wind Intelligence, koreawindintel.com
