Is the "slowdown" in data centers actually a boon? Dan Ives: The AI revolution will not be canceled; tech giants with existing computing power are now more valuable

According to information from Zhihu Finance APP, the “Blue Wave” in the U.S. mid-term elections is causing data center construction to face a slowdown. However, Dan Ives from investment firm Yorkville Ives has offered a counterintuitive assessment: supply contraction may actually prove beneficial for companies like Microsoft, Amazon, Alphabet, and Meta, which hold existing computing power. The AI revolution will not be cancelled—only the capital spending peak will be brought forward to 2027 from the original 2028-2029.

The answer given by Yorkville Ives has surprised many: this could be “hugely bullish” for the main hyperscale cloud providers. This change in construction pace is “hugely bullish” for Microsoft (MSFT.US), Amazon (AMZN.US), Alphabet (GOOGL.US), and Meta Platforms (META.US); in some scenarios Oracle (ORCL) may also be included. “We assume that under this ‘Blue Wave’, about 10% of the planned 800 to 1,000 data centers in the U.S. will now not be built... and in a stricter scenario—30% might be cancelled within the next 18 months... This means that anyone holding existing, operational capacity/GW/GPUs sees the value of their assets increase substantially compared to 48 hours ago,” wrote Dan Ives in a report to clients.

Ives believes, and emphasizes, that even under the harshest scenario, total capital expenditure over the next few years will remain in the $3 trillion to $4 trillion range, with the large tech companies alone set to spend over $1 trillion in capital expenditure next year. “Essentially, the ‘Blue Wave’ brings forward the peak in big tech’s capital expenditure growth from our earlier forecast of 2028 or 2029 to 2027—but this does not cancel Christmas. The AI revolution will proceed, just at a slower pace.”

One of the key issues is how Texas’s new Governor, Gina Hinojosa, will proceed—this is particularly significant since companies such as SpaceX (SPCX) and Tesla (TSLA) have substantial operations in the state. After her unexpected victory, Hinojosa stated on a television program that she does not wish to permanently halt data center construction, but instead wants to make it “fairer for both businesses and citizens.”

The numbers on the supply side amplify the impact of any policy disturbance: by the end of this year, the U.S. is expected to have about 40 gigawatts of data center capacity online, with another 40 to 50 gigawatts to be completed and operational next year—meaning any shift in the industry could have disproportionately large consequences.

For the semiconductor industry, Ives believes that over the next three to four years, the construction pace will become more diversified, and concerns about “overbuilding” and excess capacity may fade. He also said that the slowdown could lead to a roughly 25% reduction in financing among large tech companies next year.

“The AI revolution will arrive regardless,” Ives explained. “Democratic Party leadership, including incoming Speaker of the House Hakeem Jeffries, needs to carefully balance promoting a slowdown in U.S. data center construction while ensuring that political gamesmanship does not hand over global leadership in the AI arms race to China in the coming years.”