JPMorgan’s Michael Cembalest, who gave a timely warning on chip stocks this summer, details the new risks The biggest question after the midterm elections isn’t whether data center creation is at risk — it’s by how much. Democratic gubernatorial winners who pledged to restrict data centers include Gina Hinojosa in Texas, Rob Sand in Iowa and Keisha Lance Bottoms in Georgia. That’s as voters in various local initiatives overwhelmingly voted for data-center restrictions or pauses.
Michael Cembalest, the chairman of market and investment strategy at JPMorgan Asset Management, said the risk isn’t so much to next year but the year after. How to navigate a market that hinges on just a handful of companies Play video: How to navigate a market that hinges on just a handful of companies “Almost 75% to 80% of all of the AI data centers that are expected to be delivered in 2027 are already under construction, so these are going to be completed,” Cembalest, the chairman of market and investment strategy at JPMorgan Asset Management, told clients in a strategy note and podcast that published Wednesday. Don’t Short Yourself offers weekly money tips to help you earn it, stack it and grow it.
I would like to receive updates and special offers from Dow Jones and affiliates. I can unsubscribe at any time. About 37 gigawatts supposed to be delivered in 2028 may be subject to an outright pause, with another 12 gigawatts subject to various conditions that can be pretty onerous,” Cembalest said.
Here’s his chart laying out risks, in gigawatt terms, in 2028: One gigawatt represents 1 billion watts of power, enough to electrify more than 800,000 homes, according to various estimates. Meta Platforms this summer expanded the power capacity for its Northeast Louisiana data-center project to five gigawatts, more than three times electricity used by the city of New Orleans on any given day, according to left-leaning think tank, The Institute on Taxation and Economic Policy. Cembalest, who gave a timely warning to investors this summer on semiconductor stocks a day before the sector imploded. said data-center builders now face the prospect of paying their own grid costs, water limits, mandates labor requirements and the end of tax incentives.
Investors questioning what’s next for the AI build-out sold energy companies with skin in that game on Wednesday, with worries stretching Thursday to Korea’s Kospi index , which has become a leading indicator for the AI trade. The index slumped more than 5%, with AI chipmakers SK Hynix and Samsung tumbling 7% each. A team of analysts at research and consulting firm SemiAnalysis, led by Maya Barkin, said ahead of midterms that around three-quarters of their expected 33.8 gigawatts due for 2027 across top 20 states was already under construction.
Therefore, like Cembalest, they were looking ahead. Our model has 62.2 GW [gigawatts] of U.S. net additions that year, most of which hasn’t started construction. Much of it sits in states electing a governor on Nov. 3,” said Barkin and the team.
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