The electricity sector of US stocks is facing a reshuffle! The midterm elections increase the risk of data center delays, as Damages List and Relative Winners

The Zhitong Finance App learned that Morgan Stanley pointed out in the latest industry report that the US midterm election results may increase policy uncertainty about data center development and further worsen the US electricity shortage faced by data center developers. The election results show that there is a boycott trend against data center development in many parts of the US, which poses the risk of a shortage of computing power. The report refers to the affected targets collectively as “power-on time” stocks — that is, companies associated with Powered Shell Providers (Powered Shell Providers) and Behind the Meter (Behind the Meter) power generation.

Texas: Most Important Election Results

From the perspective of data center development, the most important election result is the Texas gubernatorial election. Democratic candidate Gina Hinojosa won. Morgan Stanley believes this will bring greater policy uncertainty and restrictions on future electricity supply, thereby increasing the relative value and pricing power of existing electricity facilities.

The background is the severity of the grid connection backlog in Texas: In August of this year, after Governor Greg Abbott ordered an audit of all data center projects in the ERCOT queue, Texas suspended some data center grid-connection processes. At the time, grid-connected applications had reached about 474 gigawatts (GW), more than 5 times the peak electricity demand recorded by ERCOT, with data centers accounting for about 90% of new electricity applications. Abbott warned that development of this scale could threaten grid reliability and stability, so ERCOT postponed transmission planning studies for the first batch (Batch Zero) of the new heavy duty grid-connected process in Texas for the first time. One purpose of the audit was to separate credible projects from speculative applications that could boost demand prospects in Texas.

Morgan Stanley has sorted out actions the Texas governor can take: first, to issue an executive order to suspend new projects (if the Republican-led state legislature quickly introduces guidance rules, the suspension period may be only a few months); second, to appoint members of the electricity regulator PUCT (six-year term, quota expires in 2027); third, to guide state agencies to slow down unissued permits. Governor designate Hinojosa has advocated suspending approval of new permits until legislation is passed (not applicable to projects under construction). However, longer-term reforms, such as abolishing sales tax relief, authorizing local governments to veto projects, codification of electricity taxpayer protections, and labor union employment requirements, require legislative cooperation from the state legislature.

Ohio: 10GW Nvidia project under pressure

The Ohio gubernatorial election was won by Democratic candidate Amy Acton, which Morgan Stanley believes will significantly increase the risk of delays in the state's data center project. The state's biggest risk project is a 10 gigawatt project involving Nvidia (NVDA.US) and a major US AI lab; another major project under construction is Amazon's (AMZN.US) 1.5 gigawatt facility in Fayette County. In May of this year, Ohio suspended consideration of new data center tax exemption applications, and the state legislature is studying data center expansion—tax exemptions are a key consideration in selecting a data center site.

Morgan Stanley emphasized that the boycott trend in data centers has strengthened its concerns about insufficient US data center capacity in 2028.

Damage Inventory and Revaluation

Morgan Stanley listed the stocks (US stock code) with the largest exposure to data centers and backstage generation in Texas: CIFR, MARA, GLXY, SEI, VST, CEG, AEP, SRE, CNP and NRG, and power equipment stocks. Relative “power-on time” winners: WMB, EQIX, DLR, WULF, APLD, TLN, BE, and HUT in Louisiana.

Specifically, when it comes to individual stock valuations, analysts re-examined the hypothesis using a probabilistic weighting method. Cipher Mining (CIFR): The total value of existing leases and Bitcoin assets is $18/share, and the 56% probability of additional sites signing a data center lease is taken into account to arrive at a target price of $51.50; the bear market scenario assumes a zero incremental project, which is only $5 per share. Galaxy Digital (GLXY.US): Helios II (830 MW) has a 95% probability of generating revenue in mid-2028, and Helios I Phase II (~400 MW) and Phase III (~200 MW), which have signed contracts with CRWV, will be electrified on time with a total SOTP valuation of $43. The value of RIOT's grid-connected guarantee at the Corsicana and Rockdale sites is likely to rise, but the proposed data center project risks falling into policy uncertainty.

In terms of independent power producers (IPP), the report predicts that the sector will experience knee-jerk losses, with VST leading the decline, followed by NRG and CEG; TLN, which has no exposure to Texas, is relatively resistant to the decline with PEG. Morgan Stanley estimates that the value of existing assets without data center upside is approximately $180 per share for VST, $129 for NRG, $430 for TLN, and $249 for CEG. ERCOT forward electricity prices are expected to decline only moderately. TLN and CEG, which have greater PJM exposure, are expected to outperform. Investors can follow the progress of nuclear power contracts (CEG, VST) and TLN data center contracts in the future.

The equipment and on-site power generation sector is expected to be under pressure due to the risk of slowing growth in the data center industry rather than Texas exposure itself. Among them, engine supplier INIO is probably the most sensitive; GEV customers and regional structures are the most diverse, and profit forecasts have limited impact, but there is downward pressure on valuation multiples. Bloom Energy (BE.US) has been named to benefit: if the Democratic Party increases its resistance to the environmental and noise impact of gas turbines, its fuel cells with no sulfur oxide and nitrogen oxide emissions, no water consumption, and no noise will be relatively more attractive in some states. Solaris is supported by a valuation of $81/share (currently $69) based on four long-term contracts with hyperscale cloud vendors and major data center operators.

Among utilities, CenterPoint (CNP.US) is most sensitive to the downside: Texas has the highest exposure, a valuation premium of about 11%, and overcrowded positions; SRE, AEP, XEL, and ETR also have Texas exposure. The report anticipates that funding will be diverted to defensive utilities such as AEE, ED, DUK and left behind in ETR.

In terms of escrow and digital asset infrastructure: EQIX has nine operating facilities in Texas (about 3% of its 280 global data centers); DLR's Dallas metropolitan area accounts for 4.2% of its 3Q26 annualized rent, and its 80 megawatt, $300 million Digital Garland project is still affected by ERCOT's verification process, but a slower or stricter approval environment will increase the scarce value of its electrically stabilized assets. WULF is immune to regulatory uncertainty in Texas (the next project is likely in Kentucky); APLD has no Texas exposure and focuses on politically friendly states, and is a relative beneficiary. The report maintains the highest level of confidence in WMB: as a back-meter power solution that relies on natural gas pipelines, it can supply gas to hyperscale cloud vendors within 18 to 24 months after signing the contract, and the current stock price significantly underestimates the post-table data center power growth that will become increasingly visible in the next 12 to 24 months.