Bloomberg reported on November 5 that limits on data-center construction after this week’s US midterm elections could reduce the odds of an AI investment bust (Bloomberg, via Yahoo Finance). Brett Ryan, an economist at Deutsche Bank Securities, told Bloomberg: “If some of these moratoriums or regulatory pressures slow some of this buildout, it almost prevents you from blowing too big of a bubble”.
Ryan added: “This is like a good excuse to kill some projects here that were already looking shaky”. About 45% of planned data-center capacity is in states where newly elected Democrats campaigned on limits, according to Goldman Sachs estimates cited by Bloomberg, and Texas alone accounts for 25% of the total.
Business Pill · Financial Conditions
An evergreen Business Engineer explainer on financial conditions. It teaches the general idea only and does not discuss Deutsche Bank or the midterms.
The key insight: Deutsche Bank economist Brett Ryan told Bloomberg that data-center moratoriums could keep the AI buildout from becoming too big a bubble; Goldman Sachs estimates cited by Bloomberg put about 45% of planned US capacity in states where winning Democrats campaigned on limits.
Ryan told Bloomberg that Deutsche Bank had already been projecting slower investment growth by 2028. After Tuesday’s elections, he said, “my knee-jerk reaction would be, OK, I don’t have to raise my 2028 forecast anytime soon”.
Bloomberg reported that economists do not foresee an immediate pullback, because much of the capacity coming online next year is already under construction, and that the election results could matter more for the 2028 outlook if groundbreaking on new facilities slows.
About 45% of planned US data-center capacity is in states where newly elected Democrats campaigned on limits, with Texas alone at 25%, according to Goldman Sachs estimates cited by Bloomberg. Splits other than Texas and the 45% total are our arithmetic.
What Bloomberg Reported on Growth
Bloomberg wrote that capital expenditures on information processing equipment and software have given the US economy the biggest boost on record over the last year, eclipsing their contribution at the peak of the 1990s dot-com boom. It reported that monthly construction spending on data centers has almost doubled over the last 12 months, to nearly $100 billion on an annualized basis.
Anna Wong of Bloomberg Economics wrote that “Slower data-center construction could deepen financing stress for leveraged developers and neocloud companies, even as tighter computing capacity preserves hyperscalers’ pricing power”. Aichi Amemiya, an economist at Nomura Securities, told Bloomberg the midterm results may act as a “natural brake on the AI investment boom, which could help prevent the potential bust”.
Where the Limits Could Land
Bloomberg reported that Gina Hinojosa, the first Democrat elected governor of Texas since 1990, has vowed to halt new approvals, that Keisha Lance Bottoms campaigned on a statewide pause in Georgia, and that Amy Acton has proposed stricter conditions on new projects in Ohio. Sarah Bianchi, a strategist at Evercore ISI, told Bloomberg she expects state moratoriums to last no more than a year.
Our earlier pieces covered the governor races (AP calls), the partisan split on nearby data centers (our piece), the Senate permitting bill (our piece) and where AI political spending landed (our PAC scorecard).
Our Numbers
Texas, at 25% of planned capacity, is about 56% of the 45% that sits in states where newly elected Democrats campaigned on limits, by our arithmetic from the Goldman Sachs estimates Bloomberg cited. Nearly $100 billion of annualized data-center construction, almost double a year earlier, implies roughly $50 billion a year earlier, by our arithmetic from Bloomberg’s description.
For scale, ING estimated that AI drives about a third of US GDP growth in 2026 (our piece), and we reported a record $83 billion annualized pace of data-center spending on October 29 (our piece).
The Structural Read
As we read the Bloomberg report, the economists quoted see limits on construction mattering more for 2028 than for next year, because much of next year’s capacity is already under construction.
As we read the Goldman Sachs estimates Bloomberg cited, Texas carries most of the exposure: 25% of planned capacity out of the 45% in states where winning Democrats campaigned on limits.
As we read Anna Wong’s note, Bloomberg Economics expects the effects to split: more financing stress for leveraged developers and neoclouds, more pricing power for hyperscalers.
Brett Ryan, economist at Deutsche Bank Securities, to Bloomberg
“This is like a good excuse to kill some projects here that were already looking shaky”
Three Implications
FOR DATA-CENTER DEVELOPERS Bloomberg reported that monthly data-center construction spending has almost doubled over 12 months to nearly $100 billion on an annualized basis.
FOR STATE POLICY Bloomberg reported that Texas’s governor-elect has vowed to halt new approvals, and Evercore ISI’s Sarah Bianchi expects state moratoriums to last no more than a year.
FOR THE INVESTMENT CYCLE Ryan told Bloomberg he would not need to raise his 2028 investment forecast anytime soon after the elections.
The analysis says: “The job of any operator, investor, or builder is to know which layer they are operating inside and which layer the binding constraint is rotating toward next.”
As we read it, permission to build has become a constraint alongside chips and power. The analysis does not discuss Deutsche Bank’s comments or the midterm results.
What Is Not Established
Bloomberg’s article is dated November 5; it surfaced on Techmeme on November 7. The Deutsche Bank comments are an economist’s remarks to Bloomberg, not a published Deutsche Bank forecast change. No state has yet enacted a new moratorium in response to the results, and the share of projects that would be delayed is not known. This piece makes no forecast.
This Week In The AI Supercycle
The Great Convergence of Capital, Power, and Geopolitics
This week’s issue: for two years the AI build-out was priced as a supply story, and last week as a credit story. This week it was priced as a permission story, and the answer arrived as a cost, not a ban.
Deutsche Bank’s Brett Ryan told Bloomberg that data-center moratoriums could keep the AI buildout from becoming too big a bubble, and that he would not need to raise his 2028 investment forecast after the midterms. Goldman Sachs estimates cited by Bloomberg put about 45% of planned capacity in states where winning Democrats campaigned on limits, with Texas alone at 25%.
A note on sourcing. Quotes and figures are from Bloomberg’s November 5 article by Matthew Boesler, read in its Yahoo Finance syndication; capacity shares are Goldman Sachs estimates as cited by Bloomberg. Calculations are ours. This is not investment advice.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
