Power bills more than 250 per cent higher near data centres

U.S. neighborhoods near data centers have experienced a 267-percent increase in electricity costs since 2020, creating political upheaval risk ahead of midterm elections. Morgan Stanley analysts expect political pledges to boost electricity supply and recommend nuclear, renewable, and natural gas investments as beneficiaries of the data center power buildout.

This edition of Market Factors starts with a remarkable data point about data centres and describes the investment opportunities that arise. Section two moves on to my concerns about big IPOs later this year and the diversion is more political that usual but not evangelical . Utilities Power bills bring investor opportunity U.S. neighbourhoods near data centres have seen a 267-per-cent increase in electricity costs and it’s not hard to see how that’s inconvenient to residents. The situation has implications and opportunities for investors. Morgan Stanley investment strategist and policy expert Monica Guerra described AI-related government oversight as “innovate first, regulate later,” but that might soon change. Electricity costs that are higher by an average of almost 300 per cent since 2020 in areas with new data centres is ample kindling for political upheaval – particularly with gasoline prices already high - and a throw-the-bums-out attitude towards existing leadership. Ahead of U.S. midterm congressional elections this fall, Ms. Guerra expects political pledges to increase electricity supply as a solution to high prices. Red tape and permitting delays will likely present less of a problem for companies building new power facilities. Nuclear power, and thus uranium miners, are likely to be among the biggest beneficiaries of the power buildout, according to Morgan Stanley. The hyperscaler megacompanies driving data centre growth have entered into long-term energy contracts with power providers, guaranteeing their electricity costs and, at the same time, helping fund new projects. Morgan Stanley analyst David Arcaro has related overweight ratings on Constellation Energy Corp. CEG-Q https://www.theglobeandmail.com/investing/markets/stocks/CEG-Q/ and X-Energy Inc. XE-Q https://www.theglobeandmail.com/investing/markets/stocks/XE-Q/ . Non-nuclear renewable energy will also be part of the electrical power expansion, assisted by popular support for environmentally friendly solutions. Mr. Arcaro has overweight ratings on First Solar Inc. FSLR-Q https://www.theglobeandmail.com/investing/markets/stocks/FSLR-Q/ and hydrogen power specialist Bloom Energy Corp. BE-N https://www.theglobeandmail.com/investing/markets/stocks/BE-N/ . Natural gas power, which can be brought online much quicker than nuclear power, will be part of the answer by necessity. Domestic investors will be less interested in Morgan Stanley’s related U.S. stock picks with so many domestic natural gas producers that will benefit from higher demand and commodity prices. Morgan Stanley has limited coverage of Canadian natural gas, the analyst is New York-based, but they have an Equal weight/attractive rating on Canadian Natural Resources Ltd. CNQ-T https://www.theglobeandmail.com/investing/markets/stocks/CNQ-T/ . The scale of data centre spending is scarcely comprehensible. Moody’s Ratings estimated 2026 spending at U$700-billion, more than five times the 2022 amount. There is skepticism and anxiety surrounding the broader AI investment trend and the potential for an abrupt halt in the related stock rally. It is extremely unlikely, however, that the megacap tech firms will give up on their AI strategies within the next 12 months, which means the companies powering the data centre expansion should have room to run. Tech OpenAI, Anthropic IPOs bring market risk Something specific is worrying me - the planned near-trillion dollar AI-related IPOs later this year. Any hint that investors aren’t clamouring to be involved in the issues would likely be followed by a sizeable market sell-off. Anthropic, developer of the Claude LLM large language model , is expected to raise something near US$300-billion remember when that meant a company was really big? , when going public in the fall. Open AI is issuing a now-unknown share of the company to the public in the fourth quarter. Management hopes to verify a US1-trillion valuation for the full company with the deal. Anthropic and OpenAI are not Pets.com. They are huge, massively profitable and hold dominant positions within the AI revolution. They are, however, raising a lot of money that would have been invested elsewhere. It is possible that the IPOs will starve the rest of the market of buyers. It is also the case that the major hyperscalers – notably Alphabet, Amazon.com and Microsoft – have seen their earnings boosted by holdings of Anthropic and OpenAI. Any problems with the IPOs would have wide-reaching consequences. Alphabet is the biggest owner of Anthropic and Amazon.com is not far behind. As the implied value of Anthropic climbs, the increase in value of Alphabet and Amazon’s position flows directly to quarterly profits as “other income.” FT Alphaville’s Robin Wigglesworth did a terrific job detailing this cross-holding phenomenon here https://www.ft.com/content/be97df0a-76b1-4cb0-9ba4-d1117d8d1450 free with registration . Mr. Wigglesworth noted that “other income” made up more than half of Alphabet’s profits for the first quarter and just under half of Amazon.com‘s earnings. To be clear, there isn’t much to doubt that the big IPOs will go smoothly. However, if anything less than a buyer frenzy occurs, the market volatility will be significant and widespread. Diversions They’re trying to drag me back into U.S. politics I used to watch all the U.S. politics shows every Sunday morning but decided a few years ago not to waste any further energy on the topic. I didn’t see any other solution when faced with a country that considers weekly school shootings as an acceptable price to pay for gun rights. The Atlantic is trying to pull me back in with “ Two Futures for the American Left. https://www.theatlantic.com/politics/2026/05/aoc-marjorie-taylor-greene/687254/?utm source=feed ” The feature by Arash Azizi outlines the two major camps in the Democratic party. The first focuses on the U.S. liberal tradition with an eye towards democratic socialism. The Bernie Sanders wing, in other words. It represents, in Mr. Azizi words, “a grand coalition of trade unions and civil-rights groups advancing the rights of women and Black Americans—in other words, the historic constituency of the post-1970s Democratic Party”. The second camp of Democrats are the anti-establishment populists who are vaguely aligned with right-wing nihilists like Alex Jones. This group is also extremely suspicious of the Democratic party leadership. I had no idea these people existed in significant numbers but, as I said, I wasn’t paying attention on purpose. There’s no danger of me inserting my own politics into this issue because I still refuse to have strong feelings about U.S. issues. My interest in this case lies in not wanting the Democrats to splinter into factions unable to win an election, leaving the field to a Donald Trump-appointed force of ineptitude that continues to treat Canada with disdain. The essentials Looking for our updates on market movers, analyst actions, stock technicals, insider trades and other daily, weekly and monthly insight? Click here https://www.theglobeandmail.com/investing/markets/inside-the-market/ to visit our Inside the Market page. The rundown Norman Rothery has pulled together a list https://www.theglobeandmail.com/investing/markets/inside-the-market/article-globe-and-mail-2026-guide-101-best-etfs-canada/ of the 101 best ETFs available to Canadian investors. But if that’s not enough for you, we also have a breakdown https://www.theglobeandmail.com/investing/markets/inside-the-market/article-the-globe-and-mail-2026-top-etf-guide-chart/ of the 500 largest ETFs. Quick hits TD chief economist Beata Caranci connected the dots between the Canadian economy’s stagnant productivity growth and the retention of our education system’s top talent in “Canada’s Silent Brain Drain,” https://economics.td.com/ca-silent-brain-drain published last week. I agree with the premise – California-based venture capital firms like YCombinator will take all the Waterloo tech-related engineering grads they can get – but I’m not sure I agree that the tax system is the main culprit. Many tech grads want to go to Palo Alto in the same way all 16-year-old hockey players want to go to the NHL. Then there’s the weather but there’s not much we can do about that. The Economist pointed out that owning franchises like McDonald’s https://www.economist.com/business/2026/05/24/franchising-has-quietly-made-countless-americans-rich might be extremely attractive in the new era of AI. More and more people sitting at home eating cheap takeout while operations get more efficient and less labour intensive. A dark but compelling thesis. The Marginal Revolution site https://marginalrevolution.com/marginalrevolution/2026/05/robin-its-happening.html?utm source=feedly&utm medium=rss&utm campaign=robin-its-happening referenced a study implying AI can cure medical conditions. Software named Robin is a “multi-agent system capable of fully automating both hypothesis generation and data analysis for experimental biology.” The program has already developed a potential treatment for macular degeneration, a condition causing in blindness, and all of the experimental process for proving it successful. We may no longer need happy accidents like Alexander Fleming coming back from vacation to find bacteria killed by mould in a nearby petri dish.