What capacity could be affected?

  • After the midterm elections, Texas and Ohio will have Democratic governors. Excluding projects under construction, Morgan Stanley estimates that a cumulative 12.4 GW of data-center IT capacity in the two states by 2030 is at risk of delay or cancellation, equivalent to 8% of the 152 GW of cumulative U.S. operating capacity the bank forecasts for 2030.
  • By originally scheduled operating year, affected new capacity amounts to 4.9, 3.8 and 3.7 GW in 2028, 2029 and 2030, respectively. The bank believes assets under construction will proceed, so capacity in 2027 is unaffected by the election results.
  • Morgan Stanley has not adjusted its total capacity forecast and treats the affected capacity as an upper bound: it believes new governors may impose requirements on projects, leading more likely to construction delays than to a reduction in the ultimate scale of data centers.

How could policy affect new projects?

  • In Texas, for example, the governor can temporarily halt new projects through an executive order and can also affect permits that have not yet been issued. Governor-elect Hinojosa has advocated pausing the issuance of new permits until legislation is enacted; projects already under construction are outside the scope of the proposal.
  • More lasting changes are constrained by the state legislature: eliminating sales-tax exemptions, giving localities the power to veto projects, and setting requirements for electricity-bill-payer protections and union hiring would all require approval from the state legislature, which is currently controlled by Republicans.
  • The bank’s capacity model already weights projects by their likelihood of being completed, with the base case explicitly applying a 30% discount; some announced projects may also not be included in the underlying data, so the model’s risk exposure is smaller than the broader scale of announced projects.

Why might existing operators benefit, and what constraints are there?

  • Slower or tighter approvals would limit new supply. Morgan Stanley believes this could increase the pricing power of existing colocation data centers, particularly by increasing the scarcity value of assets that are operationally established and have secured power.
  • Equinix operates 9 facilities in Texas, about 3% of its 280 data centers worldwide. The bank believes the company has an opportunity to raise prices and gives it an Overweight rating with a 1250-dollar price target.
  • Digital Realty has greater exposure to Texas: as of the third quarter of 2026, the Dallas metropolitan area accounted for 4.2% of its annualized gross rent. However, its planned Garland project, with a capacity of 80 MW and an investment of 300 million dollars, is also affected by how the grid verification process is implemented. The bank gives the company an Equal-weight rating and a 215-dollar price target.
  • The share prices of both companies are sensitive to volatility in AI-related news. Morgan Stanley also notes that Digital Realty’s wholesale leasing business has greater customer concentration, stronger customer bargaining power, longer lease terms and lower pricing per kilowatt.