“The three new Democrat-elect governors in Texas, Georgia and Michigan, they could impose these restrictions. Those three states combined represent about 45% of planned data center capacity buildout. In Texas alone, it's about 25%. So what they do at the state level probably matters more than what happens in DC for the time being.”
UBS On-Air: Market Moves · Money & Markets · November 2026
Context
Asked what the midterm results mean for growth and the data center buildout, UBS's Draho says Democratic control of Congress changes little for AI regulation. The surprise was how well Democrats did at the state level, where governors can slow data center buildouts or impose moratoriums.
Transcript
…kind of head into year end, as you mentioned, a lot of investors, especially hedge funds, would kind of want to clean up their books going into year end, may not want to take a lot of risk. So, willingness, having a cleaner book doesn't necessarily mean you want to actually buy this point in time.
Now, Jason, the big question for investors coming out of the midterms is: what does the outcome mean for fiscal policy, growth rates, and data center buildout? What are two or three standout implications investors should really focus on from here?
So, I would look at three kind of main implications for what it means for the economy and for the markets. First is on the fiscal front. Now, in order for the government to fund the government, you have a budget to raise the debt ceiling that will be reached by probably Q1 of next year. The Democrats in Congress will likely push to rescind some of the spending cuts that were part of the one big beautiful bill, cuts to Medicaid, I think to food stamps that are set to kick in by 2027. They've already publicly stated that. If they're successful, it could add about 20 basis points of GDP growth next year relative to the current baseline. So, don't you necessarily. Stimulus. Current law suggests some fiscal contraction next year. If the Democrats kind of get this result, it's less fiscal contraction. So that's something to kind of keep in mind in terms of the macro growth outlook. The second set of policy consideration is that President Trump still has considerable discretion on trade, regulation, foreign policy, and he could choose to moderate those existing policies or, in some sense, kind of double down and stay…
Now, the AI sell-off, Jason, to single that out, raised more questions about the pace of AI investment. And now there is the risk of new state restrictions on building data centers, as you just pointed out. How much could that restrict AI investment?
So I think it's important to kind of look at this and say, you know, let's not misinterpret efforts at the state or local level to regulate data center development with attempts to stop it entirely. I think even among most Democrats, the policy objective in most of these cases is to make data…
Now, Jason, if we turn focus to the broader economy, October's payroll report, labor data came in stronger than expected this past Friday. What does that tell you, Jason, about the underlying health of the U.S. economy and the Fed path from here?
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