Home / News / The market is telling the hyperscalers it's happy about a slower data center buildout
The market is telling the hyperscalers it's happy about a slower data center buildout
<p>Perhaps the clearest takeaway from Tuesday's US midterms is that data centers are unpopular. After a short-lived construction boom, they provide little ongoing employment and drive up local energy costs. There were 41 local votes on data center curbs and 40 of them are on track to win, with margins in the 75/25% range.</p><p>Microsoft and Amazon are heavily into the data center business, including huge plans to build more so they should be losers today, right? Wrong. Shares of those two are up around 7% and the market cheers a slower, smaller data center buildout. The market has been hating the massive spending on highly-inflated chips and data center supply chains.</p><p>In effect, the market is saying that the government is doing for you what you should be doing. Now the companies themselves have been trying to sell Wall Street on data center economics but the cash demands are simply too high and the market has said that the risk-reward isn't convincing. </p><p>At this point, there might be some reflexivity in company management. Now that they've seen how the stock reacts to data center curbs, they might slow their own ambitions to levels closer to matching free cash flow. If so, that could be a powerful tailwind for the stocks, which have struggled this year.</p><p>Amazon is particularly compelling as its core business of goods delivery isn't under threat from AI in the same way as a software company like Microsoft. </p><p></p><p>The flipside is that the companies in th
Higher education in Financial Engineering and Money & Capital Markets. SPK (Turkey CMB) licence. 16 years across institutional markets, research, and quant-driven analytics.
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<p>Perhaps the clearest takeaway from Tuesday's US midterms is that data centers are unpopular. After a short-lived construction boom, they provide little ongoing employment and drive up local energy costs. There were 41 local votes on data center curbs and 40 of them are on track to win, with margins in the 75/25% range.</p><p>Microsoft and Amazon are heavily into the data center business, including huge plans to build more so they should be losers today, right? Wrong. Shares of those two are up around 7% and the market cheers a slower, smaller data center buildout. The market has been hating the massive spending on highly-inflated chips and data center supply chains.</p><p>In effect, the market is saying that the government is doing for you what you should be doing. Now the companies themselves have been trying to sell Wall Street on data center economics but the cash demands are simply too high and the market has said that the risk-reward isn't convincing. </p><p>At this point, there might be some reflexivity in company management. Now that they've seen how the stock reacts to data center curbs, they might slow their own ambitions to levels closer to matching free cash flow. If so, that could be a powerful tailwind for the stocks, which have struggled this year.</p><p>Amazon is particularly compelling as its core business of goods delivery isn't under threat from AI in the same way as a software company like Microsoft. </p><p></p><p>The flipside is that the companies in th
