By Peter Wechsler
President & Co-Founder, Franklin Retirement Solutions
[email protected]
Below is what I wrote early yesterday (Thursday) morning before yesterday’s market rout with the S&P losing 4.3% and the Nasdaq dropping 5.5%. We are watching closely as we all hope sanity returns to the markets. Now back to the previously scheduled column…
With the elections behind us (finally), we’re all looking ahead and trying to figure out how all the changes in the House and Senate will affect the markets. All we can do now is speculate.
The biggest question for me is what will happen with data centers? So many candidates ran on outlawing new construction, and some are trying to stop those already in the works.
Quite a number of market sectors are affected by AI via the data centers. Communication stocks, tech stocks, and the industrials are closely tied to data center construction as companies try to build out AI. Companies like Nvidia, Broadcom, Micron, AMD, and Dell have been whacked lately while software companies and big pharma are on the move.
Think about everything that goes into building a data center:
• Land has to be purchased and prepared for building.
• Architects and engineers need to design the center.
• Contractors need to be hired to build out the center.
• Construction equipment will be needed to start building.
• All the construction material, from cement to roofing to drywall to plumbing, needs to be purchased. Oh, and all the electrical infrastructure.
• Next we need to fill these data centers with servers filled with semiconductors or what we call chips.
• Then we have to get the power into the building to keep all the servers running.
• Last we need to get all the cooling into the centers so the chips stay cool.
As you can see, so many parts of the economy and the markets are tied to data center construction. Yet, nobody wants these in their back yards. They want the jobs to build out and manage these centers. They want the stock market to go up as AI development will continue to move forward. The question is whether the dollars are spent in the United States or overseas.
Not sure if we’ll see much action on the data centers now or maybe not until the new Congress is seated in January. Like I keep saying, fasten your seatbelts for the upcoming bumpy ride.
Now for the big question…can the Eagles actually beat the Giants on Sunday? Enjoy…
Peter