💰 They Messed With Texas

THE MAIN EVENTThey Messed With Texas 🤠

Last week I warned that AI was becoming a political punching bag, and that the real risk to your portfolio would show up around 2028.

I still think 2028 is the big one. But on Tuesday, AI suffered its first real blow, and everyone with a 401(k) noticed.

What I Missed 🔍

Yes, President Trump can block federal anti-AI bills through January 2029.

What I didn't see coming was how far this would reach into the places actually building the boom.

Texas, where more data centers are planned than anywhere else in America, just elected a governor who campaigned on a moratorium. Voters also sided against data centers in 40 of 41 local ballot measures.

Here's what some of Tuesday's winners have said:

• Gina Hinojosa, Texas governor-elect: "I will issue a moratorium, a ban, on all data center approvals."

• Keisha Lance Bottoms, Georgia governor-elect: "I want a pause on all new construction."

• Jocelyn Benson, Michigan governor-elect: "Yes, a pause on any new data centers, a moratorium."

• Abdul El-Sayed, Michigan senator-elect, on frontier AI research, on 60 Minutes: "Full on pause."

This isn't just Democrats, either. The Republicans running in Ohio and Michigan backed halts too.

Fewer Places To Build 🏗️

When New York paused new data centers in July, it barely mattered. New York and California make up just 2.4% of the country's planned capacity.

This is different:

• States with a pause in place (or promised) hold about 45% of planned capacity

• Texas alone is more than a quarter of the national total

• Virginia and Pennsylvania, the next two biggest, are tightening but still open

A veto can't stop a governor from slowing permits, a county from voting no, or a utility commission from making developers wait. So even if Congress passes nothing, there are fewer and fewer places willing to say yes.

As Wall Street analyst Gordon Johnson put it, projects without power and permits "probably go to Louisiana, Oklahoma or nowhere."

Who Gets Hurt When Compute Gets Scarcer 🧮

Even before Tuesday, there wasn't enough computing power to go around.

Microsoft says demand still exceeds supply, and one index shows the cost of renting an Nvidia H100 chip up 32% in 30 days.

Fewer places to build means even less new compute, so whatever already exists gets more valuable. That's bad news for:

• Startups, which rent their compute and pay whatever the market charges.

• Chip and memory sellers, because fewer new buildings means fewer orders.

• Borrowers like CoreWeave and Oracle, which own compute but took on debt to build it. A delay pushes back the revenue, but the interest keeps coming due.

The giants are in a better spot. They already own the data centers and have the balance sheets to wait, which is why Amazon and Microsoft are still up on the week, even after Thursday's massacre.

Down, Not Out 🥊

J.P. Morgan's Michael Cembalest sees no issue for the data centers due in 2027, 75% of which are already under construction.

That pushes the real squeeze to 2028, but it may not last long. Goldman expects any pauses to be short-lived once states have new rules in place.

Plus, a lot of the damage is already done. Here's how far these stocks sit below their 52-week highs:

• Sandisk: -66%

• Micron: -48%

• Broadcom: -41%

• AMD: -39%

• Nvidia: -25%

I'm not calling a bottom. There's real risk if the pauses stick, because fewer buildings means smaller orders for everyone on that list. But that's a supply problem.

Until demand turns over, I'm still betting on the companies everyone has to buy from.

MARKET MOODShooting The Generals 🎖️

Winners

AppLovin

$APP  ·  Cap $119.2B  ·  Week to date ▲ 55.8%
The mobile ad company entered the week down 66% this year on worries about its growth. Then revenue jumped 55% and its forecast for this quarter beat Wall Street's. It also added $3.2 billion to its stock buyback.

McDonald's

$MCD  ·  Cap $196.8B  ·  Week to date ▲ 7.7%
McDonald's is using discounts to win back budget-conscious customers, and it's starting to work. Sales at its US restaurants started growing again in September, and profit beat forecasts.

Amazon & Microsoft

$AMZN / $MSFT  ·  Cap $2.81T / $3.98T  ·  Week to date ▲ 8.3% / ▲ 2.7%
Investors think tougher rules on new data centers will make it harder for anyone to catch Amazon and Microsoft. Amazon gained more than $200 billion in value this week, and Microsoft hit an all-time high before the market plunged.

Losers

Sandisk & Micron

$SNDK / $MU  ·  Cap $114.7B / $742.7B  ·  Week to date ▼ 29.9% / ▼ 25.8%
Investors fear fewer new data centers will mean fewer orders for these memory chip makers. Micron started the week worth about $1 trillion and lost more than $250 billion. Even so, both stocks have still doubled this year.

Oracle

$ORCL  ·  Cap $359.0B  ·  Week to date ▼ 11.9%
Oracle already owed about $125 billion when it promised to raise only $20 billion more through 2030. Five days later, it raised all of it in a single day, half by selling new stock that's now underwater.

AMD & Nvidia

$AMD / $NVDA  ·  Cap $663.3B / $4.39T  ·  Week to date ▼ 19.9% / ▼ 11.3%
Nvidia lost more than $550 billion in value this week, and AMD fell even after its sales jumped 45%. Hedge funds rushed to lock in profits by selling the biggest AI stocks. Charlie McElligott, a strategist at Japanese bank Nomura, called it "shooting the generals."

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THE ODDSHot, With A 30% Chance Of Recession 🌦️

CHART OF THE WEEKYour Inflation Isn't Average 🏠

Inflation gets reported as one number, but nobody lives it that way.

Since January 2020, pay is up 33% and prices are up 30%, so the 'average' worker is ~$35 a week ahead. But it rarely shakes out exactly average.

• The owner who locked in a low rate is ahead. Nearly half of all mortgages carry rates under 4%, so the top of this chart barely touched them.

• The renter who cooks at home is about even. Rent and groceries rose about as much as pay.

• The long-distance commuter is behind. Gas and car insurance both climbed much faster than pay.

• The young first-time buyer is way behind. The payment on a median-priced house went from about $970 a month to $2,260.

Polls indicate that Tuesday's election was largely about the cost of living.

Nearly 8 in 10 voters said inflation is a hardship for their families. The problem is that costs almost never fall, no matter who wins. It takes years of raises to undo the damage from pandemic-era spending, which is why the only solution to inflation... is to not ignite it in the first place.

WORDS TO REMEMBERPut Your Money Where Your Forecast Is 🧠