Assessing Data Center Exposure Following Midterm Results

Recent market dislocation following Midterm results has driven a meaningful re-rating across Morgan Stanley's broader AI infrastructure coverage set, creating an attractive risk/reward in certain instances as overall data center exposure and near-term capacity risk screen reasonably limited. Recent Midterm elections have added a policy overhang to the AI infrastructure build out, heightening concerns around data center development timelines and opposition to existing and new projects. AI infrastructure names under coverage have traded down 12% over the past week and 28% over the trailing three-month period on average, with neoclouds facing the greatest pressure amid renewed financing concerns. The recent sell-off appears to increasingly reflect these risks, and data would suggest minimal risk to 2027 capacity plans with risk more concentrated to 2028 projects located in Texas and Ohio. A moderate slowing of the pace of expansion in 2028 is not necessarily a blanket negative for the sto