Data Centers’ Political Battle

Summary

Ariana Salvatore discusses the growing political backlash against data centers and its implications for AI infrastructure spending. She argues that supply constraints from permitting, grid issues, and opposition are a risk to the pace of buildout but won't reduce demand; instead, they may pull forward capital spending by hyperscalers. As a result, Morgan Stanley remains constructive on AI capex and currently prefers hyperscaler stocks over semiconductors.

• Data center pushback has accelerated in 2026, with ~$156B projects canceled/delayed in Q1 alone, driven by community and political opposition.
• The pushback is primarily a supply-side risk, likely widening the gap between compute demand and capacity.
• Morgan Stanley's AI capex estimate of ~$877B in 2026 sees risks skewed higher, as hyperscalers may pull forward projects before political uncertainty rises.
• The firm's base case is a 'conditional buildout': projects face more scrutiny and delays but eventually complete, leading to higher costs and geographic dispersion.
• The constraints could accelerate adoption of on-site power generation (fuel cells, turbines, storage).
• US equity strategy prefers hyperscalers over semiconductors near-term, seeing hyperscalers as early in discounting capex discipline.