Key points
- Georgia's Keisha Lance Bottoms promises a data center order
- Greg Abbott's Texas freeze may end before Gina Hinojosa starts
- Cipher and CoreWeave top our debt-to-value table
- Why strategists see Amazon gaining from a slower buildout
Democrats won the governor's races in Texas and Georgia on November 3, and both governors-elect campaigned on pausing new data center construction. Democrats also won control of Congress.
The next day, Amazon (AMZN) and Microsoft (MSFT) each rose more than 6%, while companies that build data centers and supply their power sold off. Cipher Digital (CIFR), Vistra (VST), and Vertiv (VRT) each fell more than 12%.
One explanation from strategists, Reuters reported, is that a slower buildout could reduce spending by the biggest cloud companies while making the data centers they already own more valuable.
| Company | Business | Nov. 4 close | Change |
|---|---|---|---|
| Amazon (AMZN) | Cloud provider | $266.03 | +6.1% |
| Microsoft (MSFT) | Cloud provider | $555.80 | +6.7% |
| Alphabet (GOOGL) | Cloud provider | $288.93 | +3.2% |
| Applied Digital (APLD) | Data center developer | $16.61 | -6.7% |
| Constellation Energy (CEG) | Power generator | $245.72 | -6.7% |
| CoreWeave (CRWV) | AI cloud provider | $48.42 | -9.9% |
| IREN (IREN) | AI cloud provider | $21.71 | -11.2% |
| Vertiv (VRT) | Power and cooling equipment | $205.55 | -12.9% |
| Vistra (VST) | Power generator | $120.29 | -13.8% |
| Cipher Digital (CIFR) | Data center developer | $6.50 | -20.0% |
Closing prices are official November 4 closes. Changes are from November 3 closes.
Texas and Georgia sit near the top of the data center map
Gina Hinojosa defeated Gov. Greg Abbott in Texas after campaigning on a moratorium on new data center construction until the legislature sets additional requirements for developers. Texas holds 27% of planned data center gigawatts, according to Wells Fargo, CNBC reported.
Texas already has a pause of a kind. On August 3, Abbott directed state regulators and the grid operator to stop new data centers from connecting to the main Texas grid until an audit of their power and water use is complete. On September 21, he extended the pause to state environmental permits. The audit was expected to finish by December, and Hinojosa takes office on January 19. She has said she would ban all data center approvals until the legislature passes new laws. Gordon Johnson, founder of GLJ Research, said she could simply extend the freeze. "All the new governor has to do is keep it in place," he told CBS News. He said her win could stall 13 gigawatts of data center power in Texas.
Democrats are on track to control the Texas House, which would help Hinojosa follow through, but the state Senate appears set to stay Republican.
In Georgia, the third-largest data center market, Gov.-elect Keisha Lance Bottoms said on November 4 that she would immediately "sign an executive order for that pause, and then we will determine what else we need to do administratively to take that pause into effect." She also plans to review the state's data center tax incentives. Bottoms is likely to inherit a divided legislature.
Voters also backed local data center limits across the country on November 3. Both governors take office in January.
The biggest decliners had the largest debt deals for their size
"The most vulnerable AI companies are the borrowers, not necessarily the biggest spenders," said Mark Malek, chief investment officer at Siebert Financial.
Our AI debt tracker gives one way to compare these companies' debt deals with their market values, though deal totals aren't the same as debt outstanding. Cipher's tracked debt deals equal about 2.3 times its market value, by our calculations, and CoreWeave's (CRWV) equal about 2 times. Amazon's equal about 4.5% of its market value, and Microsoft's equal 0.6%.
| Company | Debt deals in our tracker | Market value | Deals as % of market value | Nov. 4 change |
|---|---|---|---|---|
| Cipher Digital (CIFR) | $6.7B | $3.0B | 225% | -20.0% |
| CoreWeave (CRWV) | $53.0B | $26.7B | 199% | -9.9% |
| IREN (IREN) | $12.9B | $8.8B | 147% | -11.2% |
| Applied Digital (APLD) | $6.1B | $5.0B | 121% | -6.7% |
| TeraWulf (WULF) | $5.6B | $5.8B | 96% | -6.6% |
| Nebius (NBIS) | $18.5B | $38.5B | 48% | -6.7% |
| Amazon (AMZN) | $130.7B | $2.88T | 4.5% | +6.1% |
| Microsoft (MSFT) | $25.0B | $4.13T | 0.6% | +6.7% |
Cipher, CoreWeave, and IREN (IREN) had the highest ratios among the six smaller borrowers, and those three also fell the most. That result covers one day and six stocks, and Cipher and IREN had company news of their own.
The table counts bonds, convertible notes, and loans that have priced or closed, at deal size. It isn't total debt, and it leaves out deals that are only signed or in talks, along with a $1.3 billion TeraWulf (WULF) joint venture. Some of the money hasn't been drawn. CoreWeave had drawn about $14.8 billion of its $32.2 billion in tracked loans at last count. Market values use November 4 closes, so the day's price declines also pushed the ratios higher. On November 3 closes, Cipher's ratio would be about 181% and CoreWeave's about 179%, by our calculations, and the order of the six wouldn't change.
A delayed site can push back the lease revenue that companies like these expect to use on that debt.
Strategists say existing data centers could be worth more
Amazon, Microsoft, and Alphabet (GOOGL) all rose. Investors have punished those stocks at signs of rising debt and AI spending, so a slower buildout could help them in two ways.
"The hyperscalers already have data centers, so those assets are more valuable now because there's not going to be an overbuild of data centers," said Art Hogan, chief market strategist at B. Riley Wealth. "If there's a slower pace of data-center build-out, then there's going to be a slower pace of CapEx spending."
Seema Shah, chief global strategist at Principal Asset Management, said in a research note that higher costs for new sites could "increase the value of existing infrastructure that is already powered, permitted, and operational."
Data center landlords don't prove that idea yet. Equinix (EQIX) rose 3.9% to $1,054.09, and Digital Realty (DLR) rose 2.6% to $184.88. But real estate stocks rose broadly as Treasury yields fell. The Vanguard Real Estate ETF gained 3.2%, more than Digital Realty. The 10-year Treasury yield slipped to about 4.89% from about 4.95%.
Some of the selling had other causes
Cipher jumped 18.4% on November 3, a day after its third-quarter report, so part of its November 4 fall reversed that gain. Cipher, IREN, and CoreWeave still finished below their November 2 closes, while Applied Digital (APLD) finished above its close from that day.
Hut 8 (HUT) fell 23.2% to $48.94 after quarterly results that missed estimates. IREN is scheduled to report results on November 5, and satellite images from research firm Aterio point to possible delays at one of its Texas sites.
Vistra also took a downgrade from KeyBanc. Analyst Sophie Karp said Vistra has the greatest exposure among the companies the firm covers.
Texas exposure varies by company. Cantor Fitzgerald analyst Brett Knoblauch said Cipher's next lease is now more likely to be signed outside Texas. "We see RIOT being more insulated amongst the Texas names given it is not dependent upon ERCOT/TCEQ, while CIFR's largely ERCOT-dependent catalyst path has been pushed out the most," Cantor wrote. Riot Platforms (RIOT) closed up 9.6% at $15.37 on November 4, the day its quarterly filing named Anthropic as the tenant in its Corsicana, Texas, lease.
Analysts disagree on how much changes. Some doubt legislation could meaningfully stall construction, though hearings and investigations are more likely under a Democratic Congress. Dan Ives of Yorkville Ives & Co. asked in a report whether the elections would slow the planned 800 to 1,000 US data centers. "The answer in our view is a clear YES," he wrote.
