After Democrats' victory, UBS CEO warns AI buildout could slow despite record data-center spending

US data center construction spending is at an all-time peak, yet the surge could encounter a challenge from political shifts in Washington. UBS CEO Sergio Ermotti stated that the Democrats' midterm victory might decelerate the expansion of AI infrastructure.

The annualized rate for such spending was $96.5 billion, a 90% increase compared with a year earlier. Because these numbers capture work already in progress, fresh groundbreakings provide a more timely indicator of any decrease.

Fewer Data Center Groundbreakings Ahead of Midterms

The construction data provider ConstructConnect monitors such starts on a monthly basis. In September, the firm logged $9.4 billion in new data-center initiatives, under half the $25.8 billion record from August.

One month alone is not indicative of a direction, given that several big undertakings can shift the sum. Nonetheless, ConstructConnect predicts that 2026 groundbreakings will surpass $180 billion. Additionally, it monitors $74.8 billion in projects slated to start within the next half-year.

The fate of those initiatives is critical not only for data centers, since total building expenditures have just recorded a steep decline.

Data Center Construction Bolsters Slumping Building Sector

Overall US construction outlays decreased 1.9% in September to an annualized $2.19 trillion, per the Census Bureau. This was the steepest monthly slump since April 2020.

Outlays on data centers increased 8.6% during the same period, according to the Associated General Contractors of America. The Kobeissi Letter observed that these expenditures have now expanded more than 60% year-on-year for four consecutive months.

“Since the start of 2024, data center construction spending has nearly quadrupled,” it added.

Traditional office building spending declined 8% from the prior year to $46 billion, close to its lowest mark since January 2016. The divergence between data-center and office projects has reached a record $50.5 billion.

Since a single segment is shouldering the load of the sector, a deceleration in data-center developments would affect overall spending.

Ermotti linked that vulnerability to the midterm elections. The Democratic Party secured control of Congress, and candidates promoting tighter AI regulation won important races.

“The political developments in the US may also trigger a slowdown in building up capacity,” Ermotti, CEO of UBS, told Bloomberg.

His remarks come days after a $2.3 trillion sell-off in Nasdaq equities, linked in part to worries over stricter AI policies. He nonetheless characterized AI as a powerful growth driver in the medium and long term, while cautioning that near-term volatility could continue.

Data for October, including the Census Bureau's release scheduled for December 1, was gathered before the election. November numbers, representing the initial entire month after Election Day, will indicate whether developers are starting to restrain spending.