Amazon and Microsoft rallied while chip and crypto-linked shares fell
A Wall Street Journal analysis reports that the political backlash against data center construction could slow the AI computing build-out in a way that plays into the hands of many AI companies, and especially the largest hyperscale technology firms. Telis Demos, writing for the paper, points to Democrats taking control of the House and Senate along with the governorships of Texas, Ohio and Georgia as the reason investors now contemplate more roadblocks for new data center projects. The argument is that a slowdown would ease pressure on supplies, labor and credit at the same time it raises the scarcity value of computing capacity already in place.
Anthropic’s initial public offering prospectus lists the inability to keep securing more computing power among its major risk factors, a caution that sits at the center of the build-out the analysis describes. The market’s chief concern of late has not been AI’s growth potential, according to the analysis, but the fear that meeting that growth will cost so much that even the companies that win the AI race end up far less profitable than investors once expected. Rising AI credit costs were a big factor leading AI stocks to sink in recent weeks.
Amazon and Microsoft, which already control vast computing power and have the financial might to outbid for more, each rallied more than 6% on Wednesday, in the market reaction the analysis describes. Shares of computing and data center companies with less sterling credit and fewer cash resources moved the other way. The CoinShares Bitcoin Mining and Digital Power ETF, which tracks crypto companies that have pivoted to AI, fell about 9%, and the PHLX Semiconductor index fell 3%.
Bond markets moved differently from some of those equities. Many bonds financing data center construction — for tenants such as Microsoft and Amazon, and for upstart computing provider CoreWeave, whose shares fell 9.90% — rallied, tightening yield spreads over benchmark Treasurys, according to MarketAxess data. The analysis describes the move as a shakeout in AI computing credit rather than a wipeout.
Texas was the exception. Bonds funding projects in the state were left out of the rally regardless of tenant, a sign that the political shift there has made investors nervous about whether those projects will cross the finish line or what they will cost to complete.
The divergence extended to the chipmakers. Nvidia shares fell 3.17% and Broadcom shares fell 2.00% on Wednesday, while their bonds rallied, according to MarketAxess data. The analysis reads that combination as a sign that investors are pricing in some kind of slowdown in new AI projects while also viewing the financing guarantees those two companies have offered to others as becoming less risky.
Andrew Keches, a tech, media and telecom credit analyst and head of high-yield research at Barclays, framed the mechanism. “If you’re a data center that is already running, or have power in place, there’s scarcity value,” Keches said. “And if construction slows, then maybe capital expenditures are lower, and that’s also good for credit.”
How any slowdown would work matters as much as whether one arrives. Where a state implements or extends a moratorium on construction, the analysis says, whether the pause applies to projects already started or those in late stages will be a crucial variable. Some bonds also carry terms that protect bondholders at the expense of tenants, such as rent payments that kick in on a certain date regardless of construction status.
If new projects instead go to the firms most willing to compromise — forgoing tax incentives or making local investments — the analysis says, that would tilt the landscape toward the biggest or most-experienced developers.
Given how sharply many AI stocks and bonds have sold off lately, the analysis says there could be room for more relief as Democrats’ plans come into shape. The AI build-out will still be a fierce race, the analysis concludes, even if it is run at slower speeds.