The politics
of compute

The market’s first response on 4 November drew a distinction between platforms and the infrastructure required to expand them. Microsoft closed 6.7% higher and Amazon 6.1% higher, while Reuters had reported data-centre stocks falling before the open. Less construction could mean fewer supplier orders, lower capital expenditure and less competing capacity for incumbent operators. One company’s revenue is another company’s investment bill; the two sides of the trade need not move together.⁴¹

Technology stocks sold off more broadly on 5 November. Earnings disappointments, financing concerns and institutional selling were already in play. The vote increased the risk that the terms for new capacity would change. The wider sell-off raised a separate question about what investors had been paying for that capacity.⁵

The election result does not immediately give the new congressional majorities power to impose those terms. Their terms begin on January 3, 2027, and committees must be organised before they can conduct investigations. Once organised, Democrats can use oversight, legislation and funding negotiations to seek concessions, but ordinary legislation still faces Senate procedural hurdles and a presidential veto. Investigations can raise political and reputational costs without producing a national construction ban.⁷⁸⁹

The vote raises the political importance of constraints developers already faced. Property-services firm CBRE’s pre-election research identified power procurement, permitting and community approval as material obstacles to delivery. Investment bank Nomura’s reported assessment places more risk in the 2028 pipeline because much of the capacity expected in 2027 is already under construction. That is a useful timing distinction, but construction, financing, grid connection and commercial operation remain separate milestones; an advertised completion year does not settle the project’s risk.³¹⁰

Developers can accelerate projects that can proceed before rules tighten or seek another location, but an electricity connection, customers and delivery schedule do not simply move with a proposed campus. Relocation may preserve eventual investment while disrupting near-term orders. Clearer rules offer a different possibility: developer-funded infrastructure and community compensation raise explicit costs, but may reduce uncertainty and opposition. A more expensive project with a credible approval pathway may be easier to finance than a cheaper one that never opens.

The value of slowing investment depends on which projects are deferred. Forgoing a low-return project can help cash flow, while losing capacity for a paying customer can cost future profit. A powered facility with a creditworthy customer can earn while a permitted site waits for equipment or electricity. Even there, a fixed-price contract may leave much of the benefit of scarce capacity with the customer.

A pause in US construction would affect only part of semiconductor demand: replacement servers, upgrades and overseas capacity can still require memory. Memory maker Micron illustrates the distinction. About 60% of its fiscal 2026 revenue came from data centres worldwide. Micron reports revenue by customer headquarters and separately says products shipped to customer locations outside the US generated roughly 70% of revenue. The final installation can be somewhere else again. The share of orders tied to new American sites remains undisclosed.¹²¹³

Memory earnings can move more than shipments when prices change. Micron reported record fiscal 2026 results. From the third to the fourth fiscal quarter, prices for DRAM, the working memory used in servers, rose in the high teens on a mid-single-digit increase in the amount of DRAM shipped, measured in bits, while NAND storage prices rose about 30% on about 10% more NAND bits. A greater share of high-bandwidth memory, used alongside AI processors, offset some of the pricing benefit to the gross margin of Micron’s Cloud Memory business. Strategic customer agreements improve sales visibility, though some prices reset with the market. Customers can meet commitments while building inventory. If those stocks meet rising supply, weaker pricing can reach beyond the delayed US projects.¹⁴¹³

For power-equipment suppliers, fewer projects can be partly offset by more work per site. Developer-funded grid upgrades could increase equipment per completed site even if fewer sites go ahead. Vertiv, which supplies power and cooling equipment, illustrates the different sources of demand. About 31% of its third-quarter sales came from outside the Americas and about 17% from services and spares. Those groups overlap. Management’s earlier estimate put about three-quarters of fiscal 2025 services in lifecycle work, serving equipment already installed even when new projects slip.¹⁵¹⁶

An easing of the Iran conflict could support households by restoring energy supply and reducing inflation pressure without weakening underlying demand. That could improve financial conditions and partly offset slower AI investment. It is a different scenario from oil falling because global demand is deteriorating, and neither should be confused with a solution to America’s electricity constraints. Petroleum supplied less than 1% of US electricity generation in 2025; grid capacity and local power economics remain separate problems.¹⁹

A Treasury rally only helps a developer if it lowers the rate the company can actually borrow at. A wider credit spread—the extra interest a borrower pays above a Treasury rate—tougher collateral requirements or reduced access to lenders can overwhelm a lower risk-free rate. The Fed’s response also depends on the wider inflation and employment outlook, so one commodity price does not settle the financing case.

Goldman’s reported assessment expects Democrats to use fiscal negotiations to seek concessions on Iran, selected tariffs and spending. A narrower infrastructure bargain is conceivable: clearer approvals in return for developer-funded connections, transparency and household protections. That is a scenario, not an announced agreement. Different groups could support it for different reasons without broad ideological agreement, but we should not assume progressive Democrats would systematically be easier negotiating partners than moderates, or that divided government guarantees fiscal restraint.²⁰

The relevant political incentives change before the next presidential handover. A different administration following the 2028 election would take office only in January 2029. That is no reason to postpone either de-escalation or a durable permitting settlement in our analysis until then, or to assume either will happen.⁷

The positioning statistics need to be read as flows, not as an inventory of everything investors still own. A widely circulated figure says five sessions reversed cumulative net AI purchases—purchases less sales—since early 2025. That does not mean funds liquidated all their AI holdings, and one prime broker’s client sample cannot establish market-wide exposure. The flows leave both remaining positioning and the risk of individual fund failure uncertain.²²

A sell-off can weaken the earnings it appears to anticipate. When equity prices fall, raising the same amount of cash through new equity requires issuing more shares and giving existing owners a smaller stake. Tighter credit can delay work and push out customer receipts. Compute provider CoreWeave spent about US$14.1bn on property and equipment in the first half of 2026 against US$3.7bn of operating cash. Some loan terms can trigger repayment on a delayed-site timetable while customer revenue depends on delivery. It raised US$4.2bn in September through convertible notes, debt that can be converted into shares, evidence of access to capital at the time. The gap between spending and receipts explains why a delay can hurt even when the customer still wants the capacity.²³²⁴²⁵

For a cyclical supplier, the price has to make sense on earnings that can survive the cycle. Micron traded at 8.8 times its reported fiscal 2026 earnings using a 5 November daily price. The same price would be 14.7 times earnings if annual profit per share fell 40%. That is a stress case. Management’s next-quarter guidance pointed to further growth. Resilient orders and secure funding can make a sell-off worth buying. Vertiv’s service work helps the case for durable cash, but the share price also depends on how fast that cash grows.¹²²⁶

Different products can still depend on the same construction budget. Memory can offer a cyclical opportunity when orders, realised prices, contract protection and supply discipline hold. Power equipment and copper deserve the same scrutiny. I would test platforms, memory, power equipment and copper against the same cut in customer spending before treating them as separate bets.

A specialist compute provider deserves a project-by-project test. Operating capacity, enforceable customer contracts and adequate funding can support a sound business. I would be most cautious where equity value depends on unpermitted sites opening on time, aggressive utilisation and uninterrupted refinancing. The order of those events matters when repayment dates are fixed.

Clearer rules could produce a healthier investment cycle. Viable projects would pay for their connections, communities would receive enforceable protections, and lenders could price the approval timetable with more confidence. Higher costs and tighter credit could also expose projects whose customers cannot pay enough to justify delivery.

Rising AI usage can coexist with disappointing shareholder returns. The next phase of the trade will depend on who controls usable capacity, who pays for expansion and who can finance the wait. We should look for businesses whose prices imply more damage than a careful assessment of their cash flows supports. That leaves room for conviction in AI while making each investment earn its place.