US rental stocks hit by data centre fears

Shares in the major US equipment businesses fell significantly at the end of last week in response to the US mid-term elections.

The resurgence of the Democrats in the Senate and Congress sparked a sell-off of US tech and some equipment-related stocks in the expectation that there will be greater scrutiny on data centre construction.

The US rental majors have been benefitting from high activity levels associated with mega projects, which includes data centres.

Construction of a large data centre from above (Image: GoAerials via AdobeStock - stock.adobe.com)

United Rentals and Herc Rentals saw their stock price fall by 10.2% and 10.6%, respectively, between last Tuesday and close of the NYSE on Friday.

Sunbelt Holdings, owner of Sunbelt Rentals, faced a 7.7% decline, almost the same as EquipmentShare at 7.7%, while temporary accommodation specialist McGrath RentCorp saw a 5.9% fall.

The weighted average fall in share price was 8.3%.

Caterpillar shares also fell, by 10.4%, possibly reflecting not just its exposure to construction activity around data centres but also its power generation businesses.

States most likely impacted

Reuters reported that Democrat victories in key data centre states such as Texas and Georgia have fuelled expectations of tighter AI oversight, while investors also worry that a potential extension of Texas’ data centre permit freeze could delay projects.

Source: IRN

The states where Democrats could restrict data centre development account for roughly 45% of planned US capacity, with Texas accounting for about 25%, according to Goldman Sachs, as reported by Reuters.

Power companies that supply to data centre operations could face an impact, said Reuters, especially those with exposure in Texas, Ohio, Pennsylvania and Georgia.

The news agency reported that JP Morgan had identified Vistra, NRG Energy, Constellation Energy and Talen Energy as among the power companies that could come under pressure from project delays.

“Most of these states have not placed an outright ban on data-centre development, but any new projects are expected to have higher hurdles for approval, giving approved projects a significant advantage,” analysts at JPMorgan said, according to Reuters.