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On today's Bloomberg Intelligence Show. We dig inside the big business stories impacting Wall Street and the global markets.
Each and every week, we provide in depth research and data on some of the two thousand companies and one hundred and thirty industries are analysts cover worldwide.
Today, we'll look at why the cloud based software company Salesforce gave a strong outlook for sales in the current quarter.
Class well dive into why shares of the aerospace company Airbus plunged and how this might affect the delivery of its newly produced jets.
But first we begin with some news in the casino and gaming space.
This week, New York Mets owner Steve Cohen won approval to operate a casino next to City Fields and Queens.
It's one of the three projects select different gambling licenses in New York City, and this was done by the State Gaming Commission's Facility Location Board.
Cohen, the Hedge Fund Mobile submitted an eight billion dollar casino proposal with partner hard Rock International and was picked alongside genting groups Resorts World and Ballys. These three projects are expected to generate significant revenue and create thousands of jobs for.
More and all. This guest host Alex Simonova and I were joined by Brian Eggert, Bloomberg Intelligence senior Gaming and launching analysts. We first asked Brian to talk about what the licenses represent and where we go from here.
So this is a fairly protractive process involving ultimately di selection of three recipients. By the way, the only three left in the running after a few others were limited and dropped out, and really it authorized resort casinos for the downstate New York area, mostly in New York City. And as it turns out, the three qualified casino applicants, if you will, really are are in New York City but outside the Borough of Manhattan itself.
Brian, just looking at your note on these license approvals, you write that they face a narrow path to decent returns on investment. Can you please talk to us a little bit more about that idea?
Sure? So, what we assume for those resorts is they will get what I would call a gaming revenue premium and room rate premium of ten twenty percent to other kind of high end urban area resorts such as the Burgata and Atlantic City wins Encore in Boston. However, are concerned if in terms of the return prospects are that development costs are quite high and perhaps some of the targeted non gaming contribution elements might be a bit ambitious.
So for that reason, when we worked the numbers, we came up with something like a ten percent return on investment, which is certainly a bit less than most operators would expect to attain in these regional markets.
So I'm thinking here I mean again, I'm just thinking about Steve Cohen's I was looking at his plans in conjunction with his city field. He obviously he owns the Mets. City field is out there, the National Tennis centers out there. We had the world's fair situations, so there's a ton of opportunity out there. It seems like these are going to be more retail hotel than casino. How do you think the mix of revenue is going to be there?
So this certainly is I think when we work the numbers, we assume that with respect to either food and beverage or retail entertainment revenue, those will be fairly sizable chunks of the overall revenue PI probably cuatively close to half, which is true of many kind of gaming resorts in attractive environments get a lot of non gaming revenue. I think the same will be true here. The question is will it be enough and will be margins which we take to be about thirty percent, be sufficient to get
a good return. But certainly, you know the logic of having at nexas city field makes a lot of sense. You know, the other locations valleys and a golf course in the Bronx. You know, the the resorts world in Queen's pretty much expanding and existing facility all have their merit. The question is will be enough to get a decent return, But certainly some of these locations have rational prospects.
What does this victory for these three companies mean for their competitors like Sands MGM, When where do they go from here?
So to be queer, You know, Sans exited this process back in April. When exited in May, it's Hudson York project because of community opposition at MGM in October because of the licensed terms. But bear in mind that they do have other prospects. You know, when is developing a UAE resort of its own, gm is building in Osaka, Japan. They all can buy back in their own stock. So I think they're weighing this particular opportunity relative to other development prospects.
So we're going to get the licenses by year end. What's the time taime if anybody any of these three licensed winners lay out of timetable for getting a shovel in the ground and maybe even opening the doors.
So I think it'll vary by operator. But the expectations that these resorts will generally open by twenty thirty or so. It'll take a few years to develop. There was always
the possibility of construction challenges, but that's the target. And of course our related to concerns since you mentioned MGM was MGM Ballely's Caesars O operaate casinos in Atlantic City, and you know, the proximity to Alantic City of resorts with casino elements at this caliber certainly presents a potential competitive challenge to Atlantic City itself.
AC. That's tough. That's tough because I would see you know, on the parkway, Brian, I know you see it too. We have for years, for twenty thirty years, we've seen the limousines from New York City going down the Parkway to AC. That's going to get it impacted, isn't.
It It will? I think you know, some operaters Burgata, for example, a hard rock may hold up better than others. But you know, there's always a challenge when you've got this much additional gaming capacity with resort elements opening up in relative close proximity to a to a key Atlantic City feeder market.
Our thanks to Brian Eger, Bloomberg Intelligence Senior Gaming and Lodging analysts.
We move now to the retail space.
This week, the department store chains Macy's posted better than expected results last quarter. However, shares dropped if the company pointed to a potential for soft demand from low income shoppers for the current quarter.
For more, Nora and I were joined by Mary Ross and Gilbert Bloomberg Intelligence senior equity analyst covering retail.
We first asked Mary to break down Macy's most recent quarter.
We saw, actually, I think great results coming out of Macy's see but the company put out conservative fourth quarter guidance and that's really what they always do. They seek to beat their numbers, and so that guidance came in very close, you know, at the high end. It's right around where analysts are because they already saw strong results come in from other retailers. But we think, when we
think about it, we think there's upside here. So we really view the results as look Macy's name plate because of all the changes that they're making, and what that means is they're bringing in more relevant brands that are resonating with their consumer. Not only that, but the stores look brighter. There's really kind of exciting music in the stores.
The store associates are more engaged with the customer. We've noticed that on our channel text, particularly on Black Friday, we saw more traffic in the store than we've seen
in years past. So we think that the changes that CEO Tony Sprain is making and he's really making his cues from what he's done at Bloomingdale's, it's resonating, it's working, and so we think this momentum is building and we certainly saw it in the third quarter numbers with comp sales two point seven percent for the Go Forwards stores, and so with that, I mean that's a big improvement sequentially, and so we think that's building, you know, going into
the fourth quarter and just with you know, the constant improvement that we're seeing there.
So when most people think about the retail space right now, a lot of people think about the transition to e commerce, but it sounds as though, from what you're explaining, a lot of people are going there in person. I mean, I'm looking at Coals, I'm looking at Dillard's. What are they doing in particular that's really attracting customers to come through the doors. Is it also collaborations with celebrities by chance?
Yes, you raised a valid point, and it is. It does include collaborations. So for example, they Aqua you know, they're under their Bloomingdale's brand currently has a collapse going out with a designer out to move on and so yes, these collaborations also even you know, they'll have some events.
But all of that is is certainly drawing.
In new customers and I think Macy's nameplate could certainly do more on that end. They had their first collab with their on thirty fourth brand this year, but we think we're going to see more next year because if you look at what Dillard's has been doing over the last few years, and they have a different business model
than Macy's does. They're not really promotional. For example, for Black Friday, they just had clearance sales and it was pretty comparable to last year, so that didn't mean that the rest of the merchandise was on sale.
Macy's the you know, is far more promotional.
But by doing collaborations, you know, by getting celebrities involved. So for example, for the holiday, they have Jennifer Hudson that's you know, fronting their campaign for the holiday, and they're also engaging with social influencers. Yes, all of that is resonating. We're seeing it with other brands, like for example with American Eagle, which just tapped Martha Stewart and that that's appealing to gen Z.
Oh wow, so one.
Yeah, so these bold campaigns that these brands are doing, Macy's is also getting involved there and they're dipping there to I would say, they're dipping their toe in the water. But I think we're going to see that increase, you know, and build as we get into twenty twenty six. And when you talk about the digital business, because of course
you're always hearing let's say, stronger growth on digital. For example, when we looked at Black Friday, you know, over the weekend through Cyber Monday, the sales strength was really led by digital. Digital was up double digits versus you know, load to mid single digits for in store.
So I think that's really positive there.
But so when we look at Macy's, a third of their sales come from digital, so still in the store is very big, but it's also omni channel well, the ability to buy online, take back in store, or buy online pickup in store.
Just real quick, thirty seconds, what's macy saying about the consumer out there.
Yeah, So they're saying that the lower end consumer is really feeling pinched, and that's where they're seeing some challenges on some of the price increases on their lower price point items. But the higher middle income, in the higher income consumer is resilient and they haven't flashed or batter DENI with higher prices that they took to offset tariffs, and they're still buying.
Thanks to Mary Ross Gilbert Bloomberg Intelligence, senior equity analyst covering retail.
Coming up, we continue in the retail space and look at earnings from the discout retailer dollar.
Tree listening to Bloomberg Intelligence on Bloomberg Radio, providing research and data on two thousand companies and one hundred and thirty industries.
You can access Bloomberg Intelligence via b I go on the terminal. I'm normal Linda, and I'm Paul.
Sweeney, and this is Bloomberg.
This is Bloomberg Intelligence with Scarlett Foo and Paul Sweeney on Bloomberg Radio.
I'm Paul Sweeney and I'm normal Linda, filling in for Scarlet Foo.
We continue into retail space. This week, dollar Tree reported better than expected profit and raised its full year outlook.
It's a sign that the discount retailer is capturing more spending from stretched shoppers. For more of this, Paul and I were joined by Lilly Meyer, Bloomberg Retail reporter.
First ass Lily to break down Dollar Tree's most recent quarter.
Yeah.
So Dollar Tree did well this quarter at matt expectations on revenue and same store sales, and it raised its profit outlook for the year. I think they really have hit a niche in being able to capture consumers, both lower end consumers who need cheaper goods and then high income consumers who are looking to trade down.
So, I mean, what do we think about elasticity of the lower end consumer right now? Because I mean, if you think about Walmart, I used to think of this as a company that you know, was a cheaper place to show, but it seems as though it's appealing to multiple consumer types. But it seems as a dollar Tree really is a great place for the lower end consumer.
Yeah, and actually recently dollar Tree has been looking to kind of break into that higher income shopper as well. So it has this pricing strategy, so it has some products that are still cheaper, but then it has some it's getting more products that are more expensive.
What is Dollar Tree saying about its core consumer out there? Who is that core consumer and how are they behaving?
Yeah, so I think it's core consumer is still a lower income shopper. Eighty five percent of their products are two dollars an under, so they really still have a lot of value.
So they're seeing.
Those shoppers continue to go in. But this quarter they saw traffic down and they attributed that to tariff increases.
But what's the takeaway in terms of the outlook. I mean, you talked about tariff still being a drag here.
Yeah, so tariffs will really dragged this quarter. They said that's going to lessen, So I think this was the quarter where we're really seeing the biggest tariff impact. It'll be really interesting to see what they predict for consumers next year. I'm interested to hear about that and also what they see for holiday if they continue to see hire income shoppers trading down for gifts.
Is the dollar stores do they see a surgeon sales seasonal surge and sales from holiday sales that Do they see that like a department store would.
Yeah, I don't know if it's the same surge, but you know, they sell a lot of gift wrapping and gift bags and some of those smaller gifts stocking stuffer, so I think they see a lot of that around the holidays.
So what are we seeing in terms of just the broader read on the retail space? This kind of gives us a picture of the lower end consumer, But what are you seeing across the board?
So broadly, we're really still seeing consumer spend, So there hasn't been that massive pullback that I think some of us were imagining might happen. We're still seeing consumer spend, but they're really value driven, so they're looking for the best deals they can get. They're trading down when they need to, They're stocking up on essentials.
How promotional are retailers right now? Because I'm in I know, talk to Punham Gooile, the retail analyst Bloomberg Intelligence. She says, you know, the more promotions you see out there, that's going to be that goes right to the margins, the profit margins of some of these retailers. What are we seeing this season?
That's a good question. So this season, we've actually seen some retailers pull back on deals to protect their margin. So some companies are doing that as part of a broader strategy, and then some are having to do that because of tariff. So, you know, for Black Friday, typically they'd offer big discounts and some are pulling back or not offering discounts at all.
So consumers have still been broadly spending in the retail space. What are they spending on? Is it? You know, are we spending money on essentials right now? Skipping this lurging? Yeah, yeah, that's exactly it.
So Black Friday, we talked to a lot of folks who were saying they're going to just get essentials this Black Friday. So instead of buying, you know, a Lake Crusette, Dutch oven, they were We talked to someone who instead was going to buy like three bags of forty pounds dog food.
Oh that sounds okay.
Yeah, So really.
Using you know, deals to get things that they need for themselves rather than getting that big ticket item they waited for.
What I learned from talking to retail folks is omni channel retail, which is you use both the online and the bricks and mortar, and maybe you look at something online, then you want to go touch and feel it, or maybe you order it then you pick it up at the store. Omni channels that still a thing.
Yeah, Yeah, So we were out there on Black Friday and some of the stores, and you know, while a lot of people have switched their holiday shopping to be online, we still saw a ton of people in stores, especially at stores with really good deals and stores that have appealed to young shoppers. So brands like Addicted and Princess Paul that are in malls were really flooded with young people.
Our thanks to Lily Meyer, Bloomberg Retail reporter, move next.
To quarterly earnings from the cloud based software company Salesforce.
This week, the company reported third quarter earnings that beat analyst expectations. Salesforce also gave an outlook for revenue in the current quarter that topped Wall Street estimates.
This suggests that the software company is persuading customers to buy it AI tools. For more on this, Nornite were joined by anarag Rana, Bloomberg Intelligence technology analyst.
We first asked Aniog for his take on the most recent earnings report from Salesforce.
Yeah, the sack.
The results did come in, I mean almost in line with how we were looking at it in terms of that the core business is still struggling. But when it comes to some of their AI products that has started to do well, they've gained momentum. But when you look at somebody like a salesforce, when you have a revenue base of forty one billion dollars, it takes a lot
to move the needles. So even though these products are very small and you know, growing triple digits, but they are not you know, right there in order to take down what is happening on the core business, which is a decline in seat growth or the less addition of seats because of macro IT spending, and that is probably going to be the story, at least for the near term.
So it seems as though analysts are still generally positive on in terms of AI adoption trends when we think about this company though.
Yes, absolutely, and that's you know, one of the things. We saw really good numbers on both the data cloud side of it and also the agent force. But when you look at the stock reaction and finally people have when you really scrape the numbers and see that their commercial remaining performance obligations, which is the order book for next quarter, which they expect to grow about thirteen percent in constant currency four percentage of point of that is informatica.
So when you strip that out, you will see that that particular backlock number goes from eleven percent this quarter to let's say nine or ten percent. So the core is still declining or the core is still under pressure.
So the stock down twenty seven percent year to date on a rock that does that reflect the fact that it's just it budgets are tight, or that AI poses an existential threat to certain providers like a Salesforce.
I don't think that's the case, because it's going to be very difficult for an established Fortune two thousand company to get rid of their core system of record, you know, whether that's an HRS sales customer service and just deploy a model in there. At least we are not there yet. Maybe you know, five years down the road we may see a scenario like this. But that's not really why
Salesforce is struggling. It is basically, we are the largest provider of sales automation tool and customer service tool to Fortune two thousand companies. It's those companies that are not hiding at that same rate that they used to because outside of AI and AI infrastructure, everything else is still weak at this.
Point our thanks to anaag Rana Bloomberg Intelligence technology analysts, we.
Move to some news in the aerospace sector.
This week's shares of the aerospace company Airbus plunged after revealed a quality issue on some fuselage panels of its A three to twenty airliner. This came just days after Airbus flagged a software glitch on about six thousand jets.
As a result, Airbus must inspect hundreds of its best selling A three twenty jets for potential quality flaws in the aircraft's body, and this could risk slowing down delivery of newly produced jets.
For more on this guest host Alex Semonova and I were joined by George ferguson Bloomberg Intelligence. Your aerospace, defense and airlines analysts first asked George to talk to us about why it seems Airbus has been able to fly under the radar until just recently.
I think they've also had their challenges in the supply chain along the way, just throwing challenges were so much greater that they stole the spotlight, if you will. But I mean, look, the aerospace supply chain is a bit thin right, It doesn't have the same redundancy as like you'd get in an auto supply chain, and so when you just have some little problem at one of your suppliers, you know, it can really interrupt your ability to deliver airplanes.
And I think right now what you're seeing is that Airbus already has a really tall order to meet the something like eight hundred and twenty airplane guidance or delivery guidance they've got for this year. We don't think they're gonna make it. I think they need seventy plus a three twenties in the last two months of the year
in November December. We think that's pretty hard given they've kind of delivered fifty five ish most months of in the last couple, you know, for months, and so I think a quality problem here probably really places in doubt their ability to make that guidance, and that's going to hurt their profitability for the year.
George, you mentioned that really ambitious target for eight hundred and twenty aircraft deliveries by the end of this year. How disappointed could investors get if it fails to meet that target. On top of the headwinds that this company is already facing well.
I mean, so I think you're starting to see, you know, the disappointment here. Again, I'd be surprised if most investors
weren't already concerned that the target was too high. I think Airbus has really put out a bunch of very ambitious build rate targets right the I think our latest number in A three twenty is that we would be going to something like seventy five a month, and that's consistently throughout the entire year, right by the end of twenty twenty six, which to us just seems far too high.
And I feel like Airbus keeps trying to lead the supplier base by pushing these higher numbers out and trying to pull the supplier base along, and then over time lowers some of these expectations. So look, I think anything they miss now isn't going away. It gets pushed into the next year and the next year, and again, I think the bigger challenge here is investors have to ask themselves, are a lot of these Airbus targets for delivery rates?
Are they just too ambitious? And don't we have to sort of knock them down when we build our consensus for what we think the company's going to be able to do.
Because George, I mean a number like seventy seems really high to me because when we talk about Boeing, it's like, Gee, I hope they can get the forty maybe to fifty. Is that does Boeing typically run that far behind on a production schedule than a Airbus.
So I would say that if you would consider normal the end of the last decade when both were building and Boeing wasn't having the problems with mcas Airbus was up in the higher sixties and Boeing was in the higher fifties, and so we have traditionally seen Airbus be able to put out more airplanes than Boeing. I think their supply base maybe a little bit more robust, and I think they have sort of multiple final assembly areas
around the world. I think those are some of the reasons why Airbus can just has the infrastructure to put out more airplanes, more narrowbody airplanes per month.
Our thanks to George Ferguson Bloomberg Intelligence senior Aerospace, Defense and Airlines analysts.
Coming up, we'll take a look at US data centered power demand and just how quickly the sector is expanding.
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We move next to the real estate Space nor Nite. We're joined by Jeff Langbaum. This week, Bloomberg Intelligence Senior US REET analyst.
Jeff discussed research on real estate investment trusts or reads as his outlook for them. In twenty twenty six.
We first asked Jeff how reads have been performing this year.
They haven't performed well in twenty twenty five, that's for sure. I mean, basically, you know, kind of flats to slightly down on an aggregate basis, but relative to the S and P underperformed significantly. And that's going on three years now. Obviously, you know, you had the rising rate cycle that was pretty damaging. You had some difficulties especially in the office sector. But as we sit here looking ahead to twenty twenty six,
the fundamental backdrop looks okay. And especially if you get rates falling, if that ten year yield starts to drop, and you know, that has cascading effects on evaluations, it has cascading effects on cost of capital and and really would be a boost for the sector going forward.
We are you seeing to be some bright spots right now in the reat sector, Jeff Senior.
Housing, That is the that I didn't look at you. I'm looking at you, Paul, the I mean, that's that's the clear winner right now. The fundamental backdrop, driven by demographics is huge and growing. There's an incredible coming need for housing for the aging baby boomers, and you know there's nothing, nothing being built, so the supply demand uh dynamics in that space are incredible. And you know there's a couple of roots that play in that space, Well
Towers the biggest one. They're growing like crazy and the stock is reflecting it.
All right, So what's the aside from folks, you know, old folks housing, which is I'm going to say, because you know, I'm there, I'm there, I'm in the demo what else is working here? What is is it? Is there a replay on all this AI data center stuff.
So the you know, there's there's a couple of different ways to answer that. The direct impact of AI on on reads is the two big data center reads Equinics and Digital Realty, and they are playing in that space right now. It's kind of unclear exactly where they fit.
There should be a significant amount of demand for their space, especially for the stuff that they're looking to build, but they have to raise a ton of capital in order to fund that that that development, you know, and you see capex numbers coming out from all the hyperscalers that are astronomical, and you know reads, you know, investors in reads don't necessarily love the concept of raising a ton of money to deploy it in kind of risky assets
that you need to then go lease up. So the demand should clearly be there, but it's going to be interesting to see how it plays out over the next couple of years as that demand filters through.
The other issue with AI, though, is there.
Is a kind of a concern that AI is going to impact demand for office space, and you know, as companies get more efficient, they need less headcount, they need less office space. Haven't really started to see that play out yet, but it's definitely a sentiment that is out
there and is impacting the stocks to a degree. You know, just as we got past the whole work from home thing and concern over whether offices we're ever going to have people back in them, now we have concerned that the robots are going to replace the people.
So of course we do have the income in New York City Mayor saying that he wants to freeze rents on rent stabilized apartments in New York City. What's the latest in terms of the apartment rate space right now?
Yeah, I mean it's unclear exactly what he's going to be able to do on rent stabilization freeze capping rents. But the reats that own own residential in New York City, names like Avalon Bay Equity Residential, they own stuff that's not subject to those caps. It's it's largely newer market rate stuff, and so they're not going to be directly impacted.
And so you know, at the end of the day, if there is less new the net result of of caps like that is less new stuff, get less stuff getting renovated, less stuff getting built, and and that just you know, keeps supply down and as long as demands stays elevated, then that should flow through to the ability to keep buildings full and keep rents rising to a degree.
So I think that in the in the near term, you know, that that should be it should be fine for names like like those that play in the in the city, you know, the the it's it's those that own the kind of the lower tier space that maybe are a little bit more exposed are.
Thanks to Jeff'slingbam Bloomberg Intelligence senior US re analysts.
On Bloomberg Intelligence, we often look at research from Bloomberg and EF previously known as New Energy Finance.
They have a team at Bloomberg that tracks and analyzes the energy transition from commodities to power, transport, industries, buildings, and agriculture sectors. This week we took a look at US data center powered demand and just how quickly that sector is expanding.
For more on this guest host Alex Semonovan and I were joined by Helen co b Nf, head of US Power Markets Research. We first asked Helen if we have the power necessary to power all the data centers we keep hearing about.
What we're seeing is quite an unprecedented acceleration of data center demand, driven largely by AI and at BNF. What we see and expect is that data center power demand is going to reach roughly one hundred and six gigawatts by twenty thirty five.
Where are we today, just for example.
Today, we are definitely a lot lower in capacity, so roughly half of that right now. What we also know is that that one oho six gigawats by twenty thirty five, that's thirty six percent higher than our outlook just six months ago. So we've increased that forecast quite a lot since these last six months. What we've seen is a flood of early stage projects getting announced, which results in a much larger pipeline, and therefore our forecast has also
increased quite a bit to power these data centers. What we know is that there's a lot of new build of power supply coming online to try to reach this overall power demand.
Helen, we're obviously in the early innings of this build out of data centers. What signs are you seeing already of any kind of strains on resources on electricity?
What we know is there are certain regions that are hitting a tipping point in terms of actually being able to power this overall supply. What we know is that Northern Virginia is still the largest kind of market for data center demand based on our forecast, and we are seeing a lot of growing concern in that PEG region. What we project in PGM is that data center capacity is going to hit roughly thirty one gigawatts by twenty thirty.
And what we do is when we adjust that overall kind of like what power demand looks like in PGM relative to supply, what we expect is there might be a nine point five gigawatch shortfall of overall power supply by the end of the decade if we assume that all of this data center demand is going to come online.
If all this data center demand comes online, obviously the need for electricity or power is just extraordinary. I'm a big fan of nuclear, A small mobile reactor, modular reactor here, there's SMR type things talk to us about that is that a viable technology solution at some point.
So we know that there has been a lot of company announcements around small modular nuclear as well as just nuclear in general. And there has been several different new power purchase agreement and surround nuclear by major hyperscale companies as well. What we see within BNF is that in the near term what is likely going to power data center demand is actually going to be gas, and nuclear is a much more longer kind of like long term play in terms of how you power data center demand.
But what we expect is that the major ramp up in overall demand is coming over these next three years, and gas is likely what's going to meet that overall demand.
What kind of measures are being taken to limit any kind of potential power outages from this build.
Out, Well, we do see that there's been a lot of different regulations that are evolving real time around data center demand. What we know is that Georgia adopted new rules pushing grid connection costs onto large users like industrial users. Ohio now requires data centers to pay for at least eighty five percent of the energy they request each month, even if it is underutilized, and so policies are kind of being put in place to kind of navigate rising and growing demand.
Are we building these data centers too quickly? Is there a risk for an overbuild? It just feels like it's too much, too fast, but all the projections say we're going to need all that compute.
It's a really great question, something as an analyst I think about quite a bit. At BNF. What we've done is we've benchmarked our data center forecast relative to a whole bunch of other third party forecasts out there, and what we see is that our forecast is relatively conservative compared to other third parties because our data center forecast does include and analyze some of the additional power constraints as well as like project development timelines of data center development.
And what we found is that it roughly takes seven years to develop a data center, and even that we're seeing quite a bit of new capacity come online. That is a result of just fundamentals around AI demand, whether that is company announcements of data centers as well as just like the underlying growth and trend around AI.
I can't help but wonder how are data centers addressing sustainability? Are they using clean energy? What measures are they taking.
A lot of these hyperscalers that are building out data centers do have sustainability goals and clean energy commitments. However,
like within the data center's outlook. What we mostly focused on is just what is the additional capacity and activity around data center demand within the United States, And we also did a small analysis on specific markets that are likely going to have constraints in the market around power supply, and within URCOTT and PGM, which is our two larges power market region that expects high data center demand growth, what we're seeing is that the likelihood of what's going
to meet that supply is going to be gas, and so we don't specifically look at sustainability commitments, but what we know is that a lot of what's supplying data centers will be gas in the narature.
Our thanks to Helen co be Any, head of US Power Markets Research.
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