Following the US midterm elections, some states may tighten data center approval requirements, potentially delaying approximately 5GW of US data center projects from 2028 to 2029, representing 20% of US projects and 10% of global projects. The bank believes that 2027 construction plans will not be significantly affected, but new US data center capacity may decline by 4% year-on-year in 2028, rebounding by 38% in 2029. Despite project delays, Morgan Stanley maintains its capital expenditure forecast for hyperscale cloud vendors, projecting totals of approximately $1.6 trillion and $1.8 trillion in 2027 and 2028, respectively. The bank believes this change is more about postponing construction than the end of the AI infrastructure investment cycle, potentially leading to a temporary supply-demand mismatch in the data center supply chain in 2028 and increasing the value of existing, operational data center assets.
