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The US midterm election outcome could put 141 gigawatts (GW) of planned data-centre capacity at greater risk of policy restrictions, potentially slowing artificial intelligence (AI) infrastructure investments while supporting US Treasury bonds, according to a report by ICICI Bank.
The report said Democratic victories in the governorships of Texas, Georgia and Ohio have increased the possibility of tighter scrutiny of data-centre projects. The three states together account for nearly 33 per cent of the country's operating and planned data-centre capacity. The incoming governors had campaigned on proposals to pause or restrict new projects, citing concerns over electricity and water consumption, utility costs and the impact on local communities. The three states have a combined data-centre capacity of 156 GW, of which around 141 GW is still planned and only 15 GW is operational. Texas alone accounts for 22 per cent of national capacity, while Georgia and Ohio account for 5 per cent and 6 per cent, respectively. ICICI Bank cautioned that the election outcome does not guarantee the proposed restrictions will be implemented, as policy changes would require legislative and regulatory support. However, it could lead to a "potential slowdown in further investments into data centres", rather than a nationwide reversal of the AI investment cycle. The report also said the outcome could be positive for US Treasury markets as tighter scrutiny of data-centre projects may slow AI capital expenditure and reduce borrowing by large technology companies. Lower investment spending could also moderate economic growth and inflation pressures, potentially reducing the need for further interest rate increases by the Federal Reserve. Following the election results, US two-year Treasury yields fell by as much as 9 basis points to 4.54 per cent before recovering to 4.59 per cent. The 10-year yield declined by 7 basis points to 4.89 per cent before settling at 4.91 per cent. ICICI Bank described the outcome as "a big positive for US treasuries", also pointing to the possibility of reduced deficit-expanding legislation and lower government borrowing. The report added that stronger-than-expected Democratic gains could increase pressure on the administration to end the West Asia conflict, providing further support to Treasury markets. The dollar index also weakened following the election result, with the bank attributing the decline to expectations of tighter AI regulation and its potential impact on economic growth. (ANI)
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