US power sector faces a reshuffle! Midterm elections raise data center delay risks, Morgan Stanley lists the losers and relative winners.

Title context: US power sector faces a reshuffle! Midterm elections raise data center delay risks, Morgan Stanley lists the losers and relative winners. Text: In its latest industry report, Morgan Stanley noted that the US midterm election results could exacerbate policy uncertainty around data center development and further worsen the American Electric Power Company, Inc. shortage facing data center developers. The election results show that resistance to data center development is emerging in many parts of the US, bringing with it the risk of a computing power shortage. The report collectively calls the affected names "energization timeline" stocksthat is, companies related to Powered Shell Providers and Behind the Meter generation. Texas: The most important election result From the perspective of data center development, the most important election result is the Texas gubernatorial election. Democratic candidate Gina Hinojosa won, and Morgan Stanley believes this will bring greater policy uncertainty and constraints on future power supply, thereby raising the relative value and pricing power of existing facilities that already have power. The backdrop is the severity of Texas's grid connection backlog: in August this year, after Governor Greg Abbott ordered an audit of all data center projects in the ERCOT queue, Texas paused part of the data center interconnection process. At that time, interconnection applications had reached about 474 gigawatts (GW), more than 5 times ERCOT's record peak electricity demand, with data centers accounting for about 90% of new electricity demand applications. Abbott warned that development on this scale could threaten grid reliability and stability, and ERCOT therefore for the first time postponed transmission planning studies for the first batch of projects (Batch Zero) entering Texas's new large-load interconnection process. One purpose of the audit was to distinguish credible projects from speculative applications that could inflate Texas's demand outlook. Morgan Stanley outlined the actions the Texas governor could take: first, issue an executive order pausing new projects (if the Republican-led state legislature quickly issues guiding rules, the pause could last only a few months); second, appoint members of the power regulator PUCT (six-year terms, with a seat expiring in 2027); third, direct state agencies to slow permits not yet issued. Governor-elect Hinojosa has advocated pausing approval of new permits until legislation passes (not applicable to projects under construction). More lasting reformssuch as eliminating sales tax exemptions, authorizing local governments to veto projects, codifying protections for electricity ratepayers, and union hiring requirementswould require cooperation from the state legislature. Ohio: 10GW NVIDIA Corporation project under pressure Democratic candidate Amy Acton won the Ohio gubernatorial election, and Morgan Stanley believes this will significantly increase the risk of delays for data center projects in the state. The state's largest at-risk project is a 10-gigawatt project involving NVIDIA Corporation (NVDA.US) and a major US AI lab; another large project under construction is Amazon.com, Inc.'s (AMZN.US) 1.5-gigawatt facility in Fayette County. In May this year, Ohio paused consideration of new data center tax exemption applications, with the state legislature studying data center expansiontax exemption treatment is a key consideration in data center site selection. Morgan Stanley stressed that the resistance trend toward data centers reinforces its concern about insufficient US data center capacity in 2028. Losers list and valuation re-rating Morgan Stanley listed the stocks with the greatest Texas data center and behind-the-meter generation exposure (US tickers): CIFR, MARA, GLXY, SEI, VST, CEG, AEP, SRE, CNP and NRG, as well as power equipment stocks. The relative "energization timeline" winners: WMB, EQIX, DLR, WULF, APLD, TLN, BE, and Louisiana-based HUT. As for individual stock valuations, analysts re-examined assumptions using a probability-weighted approach. Cipher Mining (CIFR): existing leases and bitcoin assets are worth a combined US$18 per share, plus a 56% weighting for the probability of signing data center leases at additional sites, yielding a US$51.50 target price; the bear case assumes zero incremental projects, at just US$5 per share. Galaxy Digital (GLXY.US): Helios II (830 MW) is assigned a 95% probability of generating revenue on schedule by mid-2028, Helios I Phase II (about 400 MW) and Phase III (about 200 MW), already contracted with CRWV, are assigned a 100% probability of being energized on time, for an SOTP valuation totaling US$43. RIOT's interconnection security value at its two sites, Corsicana and Rockdale, may rise, but the proposed data center projects risk falling into policy uncertainty. For independent power producers (IPPs), the report expects a knee-jerk underperformance in the sector, with VST leading declines and NRG and CEG following; TLN and PEG, which have no Texas exposure, are relatively resilient. Morgan Stanley estimates the value of existing assets excluding data center upside at: VST about US$180 per share, NRG about US$129, TLN about US$430, and CEG about US$249. ERCOT forward power prices are expected to decline only modestly. TLN and CEG, with greater PJM exposure, are expected to outperform relatively, and investors can later watch nuclear power contracts (CEG, VST) and TLN's data center signing progress. The equipment and on-site generation sector is expected to come under overall pressure, due to the risk of slower data center industry growth rather than Texas exposure itself, with engine supplier INIO potentially the most sensitive; GEV has the most diversified customer and regional mix, with limited impact on earnings forecasts but downward pressure on valuation multiples. Bloom Energy (BE.US) was named a beneficiary: if Democrats step up resistance over the environmental and noise impacts of gas turbines, its fuel cellswhich emit no sulfur oxides or nitrogen oxides, consume no water, and produce no noiseare relatively more attractive in some states. Solaris, based on four long-term contracts with hyperscalers and major data center operators, can obtain valuation support of US$81 per share (current price US$69). Among utilities, CenterPoint (CNP.US) is most sensitive to the downside: it has the highest Texas exposure, a valuation premium of about 11%, and crowded positioning; SRE, AEP, XEL and ETR also have Texas exposure. The report expects capital to rotate into defensive utilities such as AEE, ED and DUK and to stay in ETR. In hosting and digital asset infrastructure: EQIX has nine operating facilities in Texas (about 3% of its 280 data centers worldwide); DLR's Dallas metropolitan area accounts for 4.2% of its 3Q26 annualized rent, and its 80 MW, US$300 million Digital Garland project remains affected by the ERCOT verification process, but a slower or stricter approval environment will enhance the scarcity value of its stabilized assets that already have power. WULF is immune to Texas regulatory uncertainty (its next project will most likely be in Kentucky); APLD has no Texas exposure and focuses on politically friendly states, making it a relative beneficiary as well. The report maintains the highest conviction on WMB: as a behind-the-meter power solution built on a natural gas pipeline network, it can supply gas and power to hyperscalers within 18 to 24 months of signing, and the current share price significantly undervalues the behind-the-meter data center power growth that will become increasingly visible over the next 12 to 24 months.