While post-midterm headlines focused on a potential slowdown in data center construction, long-term power needs continue to outstrip supply and policy should remain supportive of investment and reindustrialization.
The background is one of expanding industrial activity, seen in accelerating results of companies and emboldened by stability of a divided government.
We see the post-election pullback as a buying opportunity for investors focused on the long-term power and manufacturing investment cycle.
Democrats’ sweeping gains in the midterm elections triggered a selloff in data center and power stocks as investors anticipate tougher development restrictions.1 We think that reaction takes the political implications too far. Data centers will remain a catalyst, while strengthening industrial activity reinforces the need to expand power generation.
Power Needs Outlast Political Cycles
The planned AI data center buildout is estimated to require 97 gigawatts (GW) of power in 2026-2028 alone. Projects with secured power and available grid capacity cover only 40 GW of that demand, leaving a 57 GW gap to fill.2 Even a major policy shift, if one emerges, would reshape the development trajectory over several years. In the here and now, the planned buildout already faces a substantial power shortfall.
Power demand is on a firm growth trajectory. U.S. electricity demand is forecast to rise 78% by 2050.3 This growth is broad-based, driven by the electrification of transportation and increasing industrial activity, as well as AI data centers.
Check the Map
Divided federal government will make legislation harder to pass. The state-level map also deserves a closer look. Democrat trifectas include tiny states such as Massachusetts, Rhode Island, and Maryland, where widescale data center development was never on the menu.4,5 Much of the country by land area remains under Republican or divided control, including Texas and Georgia.
Washington Is Blue—The Heartland is Red & Purple
2027 partisan breakdown of state governments
Texas shows why the election map needs context. Governor-elect Gina Hinojosa, a Democrat, campaigned on tighter data center restrictions, but Republican Governor Greg Abbott had already imposed an effective moratorium on new data center approvals pending a review.⁶ Hinojosa has also signaled openness to data center development with stronger protections for residents, while any new legislation will still need to pass a Republican-controlled state Senate.⁷ (Texas lawmakers famously meet in regular session for no more than 140 days every other year, leaving a limited window to negotiate and pass new legislation.)
The next step comes in December. Texas grid operator ERCOT is auditing proposed projects and their expected use of power, water, and public resources. Its reports are due December 10, ahead of the state utility commission’s December 17 meeting. That review could clarify when new grid connections can resume and what conditions developers must meet.⁸
Federal Support Remains
Support for domestic production has spanned presidential administrations. Funding committed under the IIJA, the CHIPS and Science Act, and the Inflation Reduction Act, all passed under President Biden, is still being deployed into manufacturing and infrastructure projects. Meanwhile, the Trump administration has supported domestic production through tariffs, tax incentives, and other industrial policies. The tools differ, but expanding the U.S. industrial base remains a bipartisan priority.
Looking ahead, the Bipartisan American Affordability and Jobs Act (BAAJA), which is under consideration in the current lame-duck session, could pave the way for energy permitting reform, though passage remains uncertain.⁹ Beyond permitting reform, manufacturers also need greater policy clarity: Uncertainty has already led them to defer capital spending.¹⁰ A less active legislative agenda under divided government in 2027-2028 could bring greater predictability, making long-term commitments easier to plan and helping unlock that investment.
Factories Are Backing Up the Thesis
U.S. manufacturers added 19,000 jobs in October, taking factory job gains above 100,000 this year. This improvement in manufacturing activity is increasingly visible in hiring and company results.
U.S. Manufacturing Has Added 101,000 Jobs This Year
Cumulative change since Dec 2025 (thousands of jobs)
Source: U.S. Bureau of Labor Statistics, Nov 6, 2026. Seasonally adjusted.
Parker Hannifin (PH) reported accelerating year-over-year organic sales growth across its three major businesses in fiscal Q1 2027, ended September 30, 2026. Compared with the prior quarter, the growth rate rose from 4.9% to 9.4% in North American industrial, from 6.5% to 11.6% in international industrial. The company also raised its full-year organic growth and adjusted earnings outlook.11
“We experienced increased demand across all market verticals, resulting in double-digit organic sales growth and record backlog levels.”
– Jenny Parmentier, Parker Hannifin Chairman and CEO11
Eaton (ETN) reported 46% year-over-year growth in its electrical backlog in Q3 2026, supporting the case for a strong investment trend in electrification.12 Timken (TKR) reported higher industrial demand and raised its full-year earnings outlook.13 These results point to improving demand across multiple end markets.
Why This Matters for Investors
We remain positive on AI investment, power infrastructure, and U.S. manufacturing. Political developments can affect individual projects, but the broader opportunity rests on demand that companies are already reporting. We view the post-election pullback as an opportunity for investors willing to look beyond the headlines and focus on that long-term picture.
The Tema Electrification ETF (VOLT) invests in companies benefiting from rising power demand. The Tema U.S. Manufacturing & Reshoring ETF (WELD) invests in companies benefiting from an acceleration of American manufacturing. Together, they offer exposure to the businesses building the capacity this investment cycle requires.