3 in 3: Will Maine Give Data Centers the Cold Shoulder?

You can have a side order of fries with your lobster roll, but not data centers. We may be about to fix believe it or not, the market is fully ignoring the impact of AI. I'm Jim Lydotes and this is three ideas in three minutes. Let's flip over the hourglass and let's go.

First, Maine is set to become the first state in the U S to put in place a moratorium on large scale data centers into the end of next year. That gives them a little bit of time to assess grid reliability, environmental impacts, and what the impact will be on electricity bills. This is really more of a pause than a full ban. And if you think about why does this really matter? The state of Maine makes up less than half of 1 % of the US population, less than half of 1 % of US GDP. But this is the first time that we are seeing a state level pushback on what could be a very big issue in the midterms as we head into the fall.

There are 10 other states where similar bills have been introduced this session. so it bears being watched really closely. If this continues to gain steam as we head into the summer and into the fall, this could have very real implications for the AI trade, both in the market's perception of the AI trade and actually the reality of the AI build out. 

Number two, we may be about to fix housing. So just a few weeks ago, the Road to Housing Act, passed ⁓ pretty resoundingly in the Senate. So it's not yet law, but it's gaining a ton of support. This is a very bipartisan bill. So the co-sponsors are Republican Senator Tim Scott of South Carolina, Democratic Senator Elizabeth Warren of Massachusetts. What's unique about this is it's not demand focused, it's supply focused. So it's focused on streamlining the environmental review process. streamlining the zoning process, really accelerating the move from office to residential, some of those conversions. If this ultimately does go through, it could be a meaningful solution to problem that we're having in the US housing market right now. And a lot of people are saying that this is going to be, if it goes through, the most consequential supply-side housing reform that we've seen since the global financial crisis. It's April. Spring has sprung. The flowers are out. And we may finally have reason to get pretty excited about the US housing market as we head into the next couple of months. 

Finally, the market is not ignoring the impact of AI on sectors and industries. Certainly over the last two years, that's driven a lot of the equity narrative, the death of software, the death of IT services, everyone really, really bullish on power. 

One thing I think is really interesting, some of the work that our team has recently done is that while the market has been swinging around different industries as perceived winners and losers around the AI trade, they are not making as much of a distinction at the company level within industries. We've measured how well individual companies are making use of AI within their actual business. And we're not seeing much differentiation at the performance level between those companies within a specific industry that are truly leveraging AI and those that are not. So as AI adoption continues to take hold, I'd say pretty unevenly across different businesses, we think there's a real opportunity for investors to differentiate the ones who are really leveraging the technology in their business from those that are lagging. It's a pretty exciting time to be an active equity investor on the back of that. 

So that is our three points in three minutes with a little bit of sand left in the bottle here. Hope you all have a great week and we'll see you back here in a couple of weeks.