It’s not everyday that $3.2tn is wiped off Wall Street. Last Thursday was that day as investors woke up to what could be a hard brake on data centre development in the US. The US midterms were over. The Democrats had triumped. Money was moving. This was a real estate story.
AI stocks and associated supply chain companies had been on a winning ride for some time. But with the mid-terms now mainly declared – Mississippi is still counting when writing this – the Democrats have both the House and Senate.
Black Swans such as the US/Iran conflagration have all sorts of nasty impacts and PropViews has written extensively on them. The latest fall out of America’s unwillingness to engage in forever wars is the obliteration of the Republican Party. An entirely avoidable event as I am sure US Veep J D Vance would concur.
The politics of the data centre
Local politics has been turning against data centres for some time. Fears of overheating, water loss and burdens on the grid have all conflated to make data centres a major target for resident groups. The politics is febrile.
Republican candidates, who broadly represented a pro-AI ticket benefited from $600 million of Tech donations during the mid terms. Elon Musk in particular leaned heavily into Texas to protect major strategic assets owned by his Space X congolomerate including the construction of a “Terrafab” which in very simple terms intends to replicate the TMSC operation in Tiawan. He plans another major data centre asset near Brownsville.
The Republicans lost all but one senate seat in Texas and Gina Hinajosa, Governor elect for the Democrats in Texas wants a moratorium. Space X and Tesla at one point were down $420 bn. Georgia and Michigan’s new Democratic Governors also intend moratoriums.
Local politics can hurt. According to Cleanview which tracks datacentre development and is worth a visit here, 41% of US planned data centre capacity is in states where the mid terms will mean a pause is now favoured. Significant disruption is ahead.
The UK dimension
UK data centre development is someway behind the US. Britain is targeting 6GW of compute by 2030, twenty times smaller than what’s in production across the pond.
The reaction in the markets is of course wild and immediate. Things will calm down.
However, places where the politics is more balanced will benefit. This could mean the UK where the UK Government has published seven core principles in recent weeks which seeks to strike a balance between commercial opportunity and local community interests. In particular, the infrastructure must deliver for communities and be sustainable. This data centre covenant seems a sensible position to hold off more populist forces.
This appears to be already working. In West London for example, the Old Oak and Park Royal Development Corporation have already struck a deal to create a heat network which could power up to 10,000 new homes from data centres that have been built in the Park Royal Industrial estate.
Getting the balance between viability, commercial opportunity and community interests is always tricky. In this case, the UK has much to learn from first movers such as the US which may for now find the scale of its AI advancement is slowed by local politics.
