The recent U.S. elections have introduced an interesting twist to the AI investment story. With potential new restrictions and even moratoriums on data-centre construction being discussed, investors are questioning whether the enormous AI spending cycle could slow. But there may be another side to this story.

What happens if demand for AI continues growing, but new computing capacity becomes harder to build? Economics tells us that when supply becomes scarce, its value generally increases. Existing data centres, and those nearing completion with reliable power already secured, could become considerably more valuable.

We're already seeing evidence of this. IREN recently disclosed a five-year computing contract generating approximately $22 million annually per megawatt, compared with $40 million on a short-term contract. SpaceX has an agreement to provide Anthropic with computing capacity worth an astonishing $1.25 billion per month, with termination flexibility on 90 days' notice after an initial period. Meanwhile, CoreWeave just reported an extraordinary $132.5 billion in contracted revenue backlog. Clearly, demand for computing power isn't disappearing anytime soon.

For investors, this could create two very different markets. Large technology companies with existing infrastructure and secured power may strengthen their competitive positions, while smaller companies dependent on future construction face greater uncertainty. Of course, this assumes proposed restrictions actually translate into construction delays, something we're watching closely. The key may increasingly
be not just who owns the most computer chips, but who has the electricity and infrastructure to operate them.

This also creates an enormous potential opportunity for Canada, particularly Alberta, with its abundant natural gas and ability to generate reliable electricity. We've previously written about how AI tokens could become the new oil. Just as energy security has become a national priority, ensuring we can produce our own computing power rather than depend on another country to supply it may become equally important.

The irony is that efforts to slow AI development could end up making the companies already leading it even more valuable.

I have also included a piece from our CIBC economics team entitled “Fragility without frugality: the backdrop for US consumers”.

As always, if you have any questions, please feel free to give us a call at any time.

Have a great weekend.

Milan