Susquehanna sees 8% of AI data center projects at risk

Susquehanna Financial Group has warned that about 8% of artificial intelligence data center projects slated for completion between 2028 and 2030 are at risk of being canceled due to potential regulatory hurdles following the 2026 midterm elections. The firm's assessment suggests that around 12 gigawatts of these projects, constituting roughly 40% of the 148 gigawatts planned for the 2025-2030 period, could face delays awaiting regulatory approval.

This represents 12% of all projects awaiting approval and 8% of the total planned projects. Susquehanna noted that the near-term disruption is expected to be minimal, as most projects scheduled for 2027 have already secured permits. The risk is primarily concentrated in the 2028-2030 timeframe, with 2027 projected to be the peak year for new installations.

Enterprise-driven inferencing workloads, which are anticipated to start ramping up in 2027 and are not included in the 148 gigawatt figure, could potentially offset any shortfall. Additionally, a recovery in non-AI semiconductor demand may also provide some compensation. In the worst-case scenario, the semiconductor industry could experience a 10% year-over-year revenue decline.

The PHLX Semiconductor Sector Index is currently trading close to its historical forward price-to-earnings ratio trough of around 15 times and has declined approximately 38% from its June peak. Susquehanna concluded that while the project-level risks have heightened, the market may have already incorporated these concerns to a greater extent than the current sentiment may indicate.