Post-Election Shift: Data Center Pricing Focuses on Scarcity Over Expansion

Original author: Zhao Ying

Source: Wall Street Journal

The core pricing anchor for the data center industry is shifting. Following the U.S. midterm elections, policy changes have rapidly redirected market focus from new capacity additions to the scarcity of completed, approved, and under-construction assets.

According to Chase Trading Desk, J.P. Morgan noted in its November 4 North American credit research report that the Democratic Party has gained control of both the House and Senate, and won gubernatorial elections in key data center states such as Texas, Georgia, New Mexico, and Nevada. Meanwhile, 42 out of 45 local ballot measures restricting data centers have either passed or are leaning toward passage.

This means that data center developers face higher approval thresholds, longer construction timelines, and more complex local political constraints. The market’s previous preference for expansion narratives is being re-priced based on permitting certainty, power access, and deployed capacity.

For investors, the most directly affected areas include high-yield project financing, independent power producers, grid connection providers, and data center developers. J.P. Morgan expects limited capital plan changes through 2027, with real pressure concentrated on projects from 2028 onward.

JPMorgan Chase stated that a "blue wave" has profound implications for the data center and power industries. Governor campaign platforms are particularly noteworthy, as policy shifts after election typically do not immediately deviate from campaign promises.

In Texas, Gina Hinojosa explicitly called for an immediate moratorium on new data centers during her campaign, granting greater decision-making power to local communities. She also emphasized freezing rates and strengthening oversight of data center infrastructure to control residents’ electricity costs.

In Georgia, Keisha Lance Bottoms did not list data centers as a core policy issue, but she supported a pause of one to six months or longer on new data center developments to assess their long-term impact on the state. Senator Jon Ossoff took a stricter stance, advocating for a complete halt and investigation into Georgia’s data center developments.

In New Mexico, Haaland’s platform calls for a pause on new large-scale projects until clear regulatory safeguards are in place. In Nevada, Ford proposes suspending tax incentives for data centers, establishing standards for employee wages and benefits, and requiring data centers to cover the additional costs of rising residential electricity rates. In Ohio, Acton supports a conditional pause, requiring data centers to cover 100% of utility costs, use union labor, and increase operational transparency.

Local voting results have reinforced this trend. According to Ballotpedia data cited by JPMorgan, 42 out of 45 local ballot measures restricting data centers have passed or are leaning toward passage, with only Harwood in North Dakota failing, and two results still pending.

These measures are primarily concentrated in the Midwest and take the form of MW caps, requirements for voter approval, or outright bans on development. By state, Ohio has the highest number at 20, followed by Illinois and Maine. The report suggests that, given the success rate and level of public engagement in these local votes, similar restrictions could spread further by 2028. J.P. Morgan cited an observer stating, “The 2028 election has already begun.”

The pricing logic of the data center market has therefore changed. JPMorgan stated that data centers and power infrastructure that have already been built, fully approved, or entered the construction phase are now valued higher than before the election.

The report quotes a trader saying, “In the past, the market was willing to pay a premium for investment-grade leases; now, it pays a premium for assets that are already built.” This captures the shift in investor focus: while contract quality remains important, deliverable capacity and regulatory certainty are gaining greater weight.

In key states such as Texas, Georgia, New Mexico, and Nevada, the path to obtaining permits and completing new data centers is expected to be more difficult, slower, and more costly. JPMorgan believes the probability of the pause evolving into a permanent ban is limited, but the pace of industry expansion has already been substantially affected.

More favorable regions may receive greater attention. The report highlights Louisiana and North Dakota, noting that these states may attract developer investment and access market funding at more attractive capital costs. Meanwhile, as the U.S. development environment becomes more complex, international data centers may also attract increased attention.

Some approved or already initiated projects have been less affected. JPMorgan noted that the 2.6-gigawatt project by Vistra Energy in Ohio and Pennsylvania, related to Meta and involving nuclear assets, is progressing and is relatively resilient to potential pause policies. In Georgia, the 3.2-gigawatt project by Georgia Power related to OpenAI has been approved by the Georgia Public Service Commission and is expected to begin construction by the end of 2026. The report considers this project relatively secure.

In Texas, American Electric Power Texas may receive some support. The company has recently increased the approved data center development capacity in the state to 1.6 GW. In comparison, projects that have not yet been approved, financed, or entered construction will face higher discounts.

In the fields of high-performance computing and high-yield project financing, investors are most focused on regulatory changes in Texas. J.P. Morgan noted that approximately 27% of the financed data center capacity in the high-yield project financing market is under construction in Texas.

Risks are primarily concentrated in projects scheduled to come online in 2028 and 2029. These projects may face delays and, in extreme cases, could be terminated. The pipeline of unfunded projects has also become more uncertain, with financing becoming more difficult.

Of the listed high-yield data center developers tracked by JPMorgan, approximately 78% are located in Texas, primarily involving Cipher and Galaxy. The report states that this makes policy changes in Texas one of the most important variables in the data center credit market.

Neocloud enterprises also face indirect risks. If data center construction is delayed, the timeline for capacity deployment will be pushed back, thereby affecting the pace of contract execution. According to publicly available information, CRWV leases or plans to lease data centers in North Dakota, Illinois, Georgia, Texas, North Carolina, Oklahoma, Virginia, and New York in the United States, and owns data centers in Pennsylvania and New Jersey; its international projects involve the United Kingdom, Denmark, Indonesia, India, and Canada.

The slowdown in data center development will first impact electricity demand expectations. JPMorgan expects most independent power producers to face pressure, particularly those with higher exposure to Texas, Ohio, Pennsylvania, and Georgia.

The report notes that while most states have not directly banned data center development, the approval thresholds for new projects will be higher, giving a clear advantage to projects already approved. A slowdown in data center development could lower electricity prices, but meaningful new power generation capacity is not expected until around 2029.

The short-term impact on bridging power and behind-the-meter power suppliers may be greater. JPMorgan Chase stated that extended data center construction cycles could weaken demand for bridging power solutions, particularly in Texas and the PJM markets.

The impact of regulated utilities has been relatively mild. The report notes that data center demand previously supported 6% to 9% of EPS growth expectations for some utilities, but a decline in related capital expenditures may also alleviate balance sheet pressures, particularly given that capital investment is expected to grow at least through 2030.

JPMorgan Chase expects no major changes to the 2027 capital plan, as most of the projects for that year's spending have already begun. Greater impacts will be felt in 2028 and beyond.

From the financing perspective, most 2027 projects have already secured funding. The market now needs to determine when projects from 2028 and beyond will receive financial support. The report anticipates that short-term bond supply may slow down, with the first new transactions likely concentrated on data center and GPU deployment projects in “safe” jurisdictions.

This slowdown also has its positive side. A flattening growth curve helps commercialization catch up with capital expenditures while maintaining tight hash rate supply for a longer period. For investors, the data center industry is transitioning from a pure expansion phase into a new stage where pricing is determined by licensing, electricity, construction timelines, and asset realization.