AI build‑out's real test comes in 2028, analysts say after the midterms

Analysts say the real test for the AI build-out arrives in 2028, not 2027. JPMorgan's Michael Cembalest noted on Wednesday that 37.5 gigawatts of planned 2028 data center capacity could face pauses, with another 15 gigawatts facing "conditions", Axios reported.

The trigger was Tuesday's US midterm vote. Democratic wins in governor races and dozens of local ballot measures are expected to slow new construction.

What the numbers say

Before the election, 96 GW of data center capacity was expected to come online in 2028. That's according to a summary of Cembalest's note, which also says the 37 GW expected in 2027, 75% of it already under construction, is largely unaffected.

The estimates differ by source. UBS strategists said data center pauses will slow the build-out into 2028, with about 30% of expected 2028 additions now at risk. That's per Reuters. Cembalest's pause figure is a bigger share of the 96 GW, though the two firms may be measuring different things.

Nomura reached the same timing conclusion. It said projects planned for 2028 face greater exposure to permitting delays, and that tighter rules could become a bigger headwind to AI investment from that year. The note was covered by CNBC.

The political backdrop

Voters did much of the work. Per the Washington Post, as relayed by PYMNTS, voters in at least 29 jurisdictions approved bans or restrictions on data centers, out of 41 jurisdictions in 10 states where such measures were on the ballot.

Texas is the biggest single exposure. Gina Hinojosa won the governor's race and campaigned on keeping a statewide data center construction moratorium until lawmakers address water, electricity, air and property-rights impacts. SemiAnalysis told Axios that a hold of more than six months would mean extended delays for Texas projects, which on paper account for 41% of new US capacity in 2028. The details are in PYMNTS' report.

A national ban looks unlikely. JPMorgan's Jahangir Aziz said a nationwide moratorium would most likely be vetoed by the president, and that 2028 spending is where "serious questions are being raised." He spoke to CNBC-TV18.

Oxford Economics' Bernard Yaros, quoted by The Straits Times' syndication partner, said the risk sits mainly with state and local policy. Governors, utility regulators and zoning boards control rates, incentives, permitting and grid access.

Who gains and who loses

Markets sorted winners from losers quickly. Chip stocks and companies linked to AI infrastructure fell again after the Democratic victory. Utilities and equipment suppliers such as GE Vernova and Constellation Energy traded lower, and Dell and HPE lost about 2% each.

Large tech platforms rose. Microsoft and Amazon rallied on expectations that a slower build-out could cut data center costs and rein in capital spending, CNBC reported. Needham's Laura Martin argued, in a note quoted by PYMNTS, that higher regulatory barriers entrench incumbents.

Not everyone reads the vote as a turning point. CNBC's Jim Cramer said the elections did not upend the business cycle.

The money question in 2028

Politics isn't the only reason 2028 matters. Barclays' Alex Altmann said AI needs about a trillion dollars of revenue by the end of 2028 to pay for its capex, while Barclays expects a run rate near $400 billion. TIKR relayed those figures from a podcast appearance.

In my view, that's the part worth watching. A slower build-out could ease that gap, which may be why investors cheered it.

What happens next

The next markers are concrete: which new governors sign pauses, and how long any pause lasts. The Texas legislative session ends in mid-2027, per PYMNTS, so lawmakers there will likely set the pace.

I'd treat the 37.5 GW figure as an estimate, not a forecast. It rests on what incoming governors have said, and campaign promises don't always survive contact with legislatures. Still, analysts from JPMorgan, UBS and Nomura all point at 2028, and I think that's a fair signal about where the pressure lands.