Episode summary
Risk to data centers is smaller than headlines suggest, says William Blair's Tim Mulrooney
CNBC Fast Money
· · 5 min · Hosts: Seema Mody · Guests: Tim Mulrooney
Summary
Tim Mulrooney argues that the political risk to U.S. data center buildout is smaller than the headlines suggest. William Blair’s analysis says only about 7% to 9% of planned AI capacity is in states where a governor or candidate is aligned with a moratorium, even though data centers are a major issue in 36 gubernatorial races and 20 of those states have moratoriums or pauses on the ballot.
Mulrooney says the more important point is timing: the MEP contractors building out data centers today are generally working on projects that were permitted 2 or 3 years ago. That means any new moratoriums would likely not hit revenue for the next year or two, and the real impact would be pushed into 2029 or 2030. He adds that much of the at-risk capacity could relocate if needed.
At the local level, he sees more guardrails than outright bans, including ratepayer protections, bring-your-own-power rules, and environmental requirements. He points to Loudoun County, Virginia, as an example of a pause that simply shifted work elsewhere while companies waited for the issue to be resolved.
Key takeaways
- Mulrooney says the risk to planned AI data center capacity is only about 9% at worst, not the broad threat implied by headlines.
- He expects little to no near-term revenue impact for MEP contractors such as Comfort Systems, EMCOR, and AP Group because today’s projects were permitted years ago.
- Mulrooney says the real timing risk is 2029 or 2030, when new moratoriums could affect a later wave of buildout.
- He says local governments are more likely to impose guardrails like ratepayer protections and environmental rules than full bans.
- Mulrooney argues capacity can often be relocated, so even affected states may not lose the buildout permanently.
Notable quotes
“I THINK THAT THE THE RISK IS SMALLER THAN THE HEADLINES SUGGEST”
“WE'VE GOT 36 GUBERNATORIAL ELECTIONS THIS CYCLE, AND YOU'VE GOT 22 STATES”
“REALLY THERE'S ONLY EIGHT STATES. IT WAS SEVEN WHEN WE PUBLISHED THE REPORT. NOW WE'RE AT EIGHT STATES”
“WE WOULDN'T EXPECT ESSENTIALLY ANY IMPACT TO THEIR REVENUE OVER THE NEXT YEAR OR TWO”
“THE BOTTLENECK IS SKILLED TRADES WORKERS, AND SO THEY CAN SHIFT AND SEND THEIR PEOPLE”
How the episode opens
Welcome back to fast money. A hot button topic in this year's midterms is the build out of data centers. 20 of the 36 states with governor races this year also have moratoriums or pausing construction on the ballot.
William Blair out with a piece late last month that suggests data centers may not be as hampered by politics as it feels. Finding just 7% of planned ai capacity is in states where gubernatorial candidates support moratoriums. Joining us now is group head of global services Tim Mulrooney.
Tim, great to have you with us.
Thanks for having me. — And we should note that the 7% is by gigawatt. That's how you measure it. But it sounds like a lot. And it seems like a lot in terms of the polls that come out. But you really think that that there is going to be no change, that you haven't seen any changes in pipelines or, or planned build outs at all from the coverage universe that you have.
Yeah. That's right. I think that the the risk is smaller than the headlines suggest.
I mean, the political rhetoric right now has ramped up significantly in recent months. Data centers around the ballot box across the country. We're kind of in this period of peak nimbyism.
The narrative here is that we've got 36 gubernatorial elections this cycle, and you've got 22 states. Actually, we count now 22 states. Things are changing where you have at least one candidate who is pro moratorium heading into the election.
So, you know, but we did the analysis here that suggests that really there's only eight states. It was seven when we published the report. Now we're at eight states.
That's 9% of planned ai capacity that we expect will have a candidate or a governor on the other side of this election that is pro moratorium.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- data center buildout
- political headwinds
- data center risk
- media headlines
- infrastructure investment
Companies and tickers mentioned
- William Blair
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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