Bernstein lists best data center stocks to buy on discount

 Bernstein told clients in a note on Friday that the market’s reaction to the midterm elections in AI and data center stocks has been overblown, and it highlighted its top picks across the sector.

“Fundamentally, it wasn’t quite a non-event, but based on what was priced in going into the midterms, we think the market reaction has been overblown,” analyst Madison Rezaei wrote.

Bernstein estimates that the credible data center pipeline at risk from anti-data center legislation or restrictive governors rose to 105 gigawatts after the election, from 78 GW. Of the roughly 27 GW added, about 10 GW is already under construction and protected, leaving about 17 GW potentially subject to tighter rules. 

Bernstein expects only a fraction of that to be lost, implying a 2% to 4% hit to the national pipeline.

The firm flagged Georgia as an underappreciated risk after Democrats took control of its Public Service Commission, which oversees power costs and capacity approvals. In Texas, Governor-elect Hinojosa has promised a moratorium on approvals until new protections pass.

Still, Bernstein noted that data center projects account for about 8% of state GDP, giving officials strong incentives to moderate their opposition.

“Developers may shoulder more grid costs and community contributions, but fundamentally, we think a lot of these GWs still get built,” Rezaei said.

Developers with the most exposed pipelines include Fermi, Galaxy Digital and Cipher Mining.

Bernstein’s top picks include Equinix and Digital Realty in infrastructure; Quanta Services, Eaton, Forgent and Legence in machinery and electricals; Vertiv, nVent, Johnson Controls and Trane in multi-industry; GE Vernova; Arista Networks, Ciena and Celestica in networking; Oracle, Microsoft and SAP in software; Amazon; and TeraWulf, Riot Platforms and IREN among AI infrastructure developers.