Utilities Have Rallied on AI Demand. Election Results Could Threaten Their Next Growth Phase

Utilities have been among the quieter winners of the AI boom. Every new data center needs electricity, and the companies building the grid to supply it have enjoyed steady, regulated returns.

But Tuesday's elections could change that equation. Governor races, utility commission contests and 41 local ballot measures will help determine which projects move forward, how much utilities can earn and who ultimately pays for the expansion.

Rising power bills put AI on the ballot

Opposition to data centers has been building, and voters are becoming less welcoming. A September Quinnipiac survey found that 72% would oppose a new data center in their community, up from 65% in March. In Texas, another poll found that 69% of residents oppose new construction nearby.

Washington remains broadly supportive of AI expansion, with President Trump backing the industry and holding veto power over legislation that could slow development.

A Democratic takeover of Congress could bring closer scrutiny of electricity costs and the massive spending plans at AmazonAMZN, MetaMETA and other tech giants. For utility investors, however, the more immediate risks lie with state regulators, who decide how much companies can charge customers and earn on new infrastructure.

Three states could reshape utility earnings

Texas has made data centers a major campaign issue. Democratic gubernatorial candidate Gina Hinojosa wants construction paused until tougher rules are introduced and state tax breaks are eliminated.

Republican Gov. Greg Abbott has maintained a temporary moratorium since August while the state audits operators. Tighter restrictions could slow Sempra'sSRE transmission investments in West Texas and weaken the demand outlook for CenterPoint EnergyCNP and American Electric PowerAEP.

OracleORCL, which recently filed to raise $20B for its AI expansion, also has major power requirements tied to Texas and Arizona. FermiFRMI, meanwhile, is developing a large data center campus in Texas.

Georgia presents a different risk. The state accounts for roughly two-thirds of Southern Co'sSO earnings and planned investment, making its utility commission especially important to shareholders. Democrats won two commission seats last year and could gain majority control, potentially limiting Southern's AI-driven earnings growth once its rate freeze expires in 2028.

Arizona investors face a similar question. A Democratic victory on the state's utility commission could restrict the returns Pinnacle WestPNW earns on infrastructure built to serve new data centers.

Local voters could stall Big Tech's plans

The fight over AI infrastructure is also playing out at the local level, where zoning decisions can determine whether billion-dollar projects ever break ground. Ohio alone accounts for 21 of Tuesday's 41 ballot measures, with 154 data centers already operating across the state and dozens more under construction or planned.

In Piqua, voters are weighing a measure affecting Meta's proposed development. Wilmington is considering rezoning near an Amazon project, while two southern Ohio townships could adopt restrictions that effectively block data centers near a roughly 1K-acre site being evaluated by Amazon Web Services.

Recent results suggest developers have reason to worry. Earlier this year, voters in New Hampshire, Wisconsin, California and Michigan decided six data center measures, all of which resulted in tighter development rules. A Wisconsin court also recently upheld a voter-approved ordinance affecting Vantage Data Centers' $15B campus for Oracle and OpenAI.

The resistance is becoming harder to dismiss. Local governments across 40 states have adopted data center bans, with 294 moratoriums now in place. S&P Global Ratings warns that construction delays can carry financial consequences beyond higher costs, including rent credits for tenants and, in some cases, the loss of those customers altogether.

What investors should watch

The election could widen the gap between utility stocks. Companies operating in states with fewer regulatory challenges may be better positioned to benefit from rising electricity demand, while Southern, Pinnacle West and Sempra face more immediate uncertainty over future investment returns.

For now, investors may want to wait for the Georgia, Arizona and Texas results before adding exposure. Big Tech's spending plans also deserve some caution, since local opposition disrupted at least 45 projects worth $68B in the second quarter alone, according to Data Center Watch. The demand for electricity isn't going away, but the profits from supplying it are no longer quite as predictable.