The most feared scenario for AI bulls-a Democratic sweep of Congress and gubernatorial victories in key states like Texas and Ohio-came to fruition. So why are shares of the largest AI hyperscalers soaring?
For incumbent players in cloud computing like Amazon and Microsoft, data-center moratoriums that slow the pace of the AI infrastructure buildout would likely raise the prices they can charge customers, boosting profits, analysts say.
A construction slowdown could also assuage investor concerns that tech giants aiming to win the AI race at all costs are going to borrow and spend too recklessly in the process, making their businesses riskier and more indebted.
Meanwhile, any new restrictions are likely to hit so called "neo-cloud" competitors, the upstart companies that have gone all in on building data centers in recent years.
Hyperscalers "already have compute. They have the data centers. So if you're pulling up the drawbridge, you're giving them their moat," said Michael Antonelli, a market strategist for Baird Private Wealth Management.
In addition, a slowdown could improve their free cash flow which has recently turned negative. "You're reducing the odds that we start doing things that make no sense just to chase the next capex dollar," said Antonelli.
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