Egan-Jones Expects Both Parties to Keep Backing the AI Buildout
Egan-Jones released a commentary examining why the mainstream of both parties is likely to keep supporting the artificial intelligence buildout despite public opposition to local data centers. With the four largest hyperscalers planning more than $700 billion of capital spending this year, the piece offers investors a framework for the political risk involved.
Egan-Jones draws a parallel with drug makers, which have remained unpopular for years yet kept the backing of both parties while leading all other industries in federal lobbying almost every quarter since 2010. Opposition to AI is measurable: Gallup finds 71% of Americans oppose a local AI data center, compared with 53% for a nuclear plant. AI has also gained ground at the ballot box, where the pro-AI super PAC network Leading the Future has raised $140 million for the midterms.
A September 16 House vote illustrates the pattern. By 417 to 3, members passed a bill pushing states to make large data centers pay for the power lines and plants built to serve them, answering complaints about power bills without limiting how many data centers get built. Egan-Jones expects the populist wings of both parties, not the mainstream, to lead any push to halt the buildout.
Pressure is more direct in the states. The commentary points to Texas, which has frozen new data center grid approvals and permits, and to new laws in California and Florida that shift grid costs onto operators or protect residents from paying for data centers' power.
For credit, Egan-Jones views the shift as positive for utilities, which face less risk of being left with the bill if a project is canceled. The largest hyperscalers face a slightly negative effect from higher hookup costs and longer waits, funded partly with debt. The assessment is negative for Oracle and for lenders, while smaller data center developers are most at risk, with $68 billion of projects delayed or canceled last quarter.
Egan-Jones concludes that the industry faces higher costs and slower permits, while the money involved keeps both parties' mainstream behind AI growth. Calling it perhaps the fastest industrial buildout in world history, the commentary finds that institutional investors must pay attention.
About Egan-Jones Ratings
Egan-Jones, an NRSRO founded in 1995, offers timely and accurate credit ratings and proxy services.
Media Contact:
[email protected]
+1 212 425 0460
SOURCE Egan-Jones Ratings Co.