Evening Analysis — 2026-10-15

Dek

Utilities aren't waiting for the grid to catch up: they're putting power plants right next to the data centers, even as Wall Street's biggest voices warn the money may run out first.

The Big Shift

American Electric Power (AEP), one of the largest US utilities, is spending about $4 billion on a 702-megawatt Bloom Energy fuel-cell plant in Wyoming. The plant is under contract to Google. AEP also agreed to buy up to 1.6 gigawatts of Mainspring linear generators, compact machines that burn gas to make power on site (¹). This matters because the buyer is a utility, not a tech company working around one. "Behind-the-meter" power means power made on site, without waiting years for a grid connection. That model is now going mainstream through the companies that own the grid. What comes next: more utility-scale orders for on-site power, and a price fight between the technologies competing to supply it.

Analysis

Power: the demand is real and getting bigger. On the same day, PJM said it will study SoftBank's Ohio "Flagship" project. PJM runs the grid for 13 states plus D.C. The project would add about 10 GW of data-center load, roughly the power use of 8 million homes. It comes with about 10.2 GW of new gas plants and 765-kV transmission lines (the highest-voltage lines in the US) (²). That supports the bull case for GE Vernova (GEV, gas turbines) and Quanta (PWR, transmission builder). But it's a study, not a purchase order. Behind it, the EIA confirmed that PJM, ERCOT (Texas) and SWPP (the central US grid) all set peak-demand records this summer (³). Grid operators are now writing rules just for very large loads. PJM wants big computing sites to stay connected through voltage and frequency swings ("ride-through"). It also wants to warn when the grid is tight even in mild weather (⁴, ⁵). The Bonneville Power Administration, which runs much of the Northwest grid, is proposing an "open season" to connect large loads faster (⁶). What this points to: power is still the main limit on AI growth, and the Own-the-Bottleneck thesis holds.

On-site power is working, but it's no longer one company's market. The AEP deal is a clear win for Bloom (BE): a big order, plus a new kind of buyer. But the math is notable. $4 billion for 702 MW is about $5.7 million per megawatt, which is expensive. Buyers are paying a premium for speed. The same utility also signed up for 1.6 GW of a rival technology. That points to a market where Bloom has to compete on price, not just on being available. It also weakens the thesis assumption that no cheaper competing technology exists. Conviction on BE goes up, but only modestly.

Money: the warnings are getting louder, but no one has cut spending yet. Gartner called AI data-center spending "unsustainable" and flagged $3.5 trillion in possible write-downs (⁷). BlackRock's CEO warned that a pause in US data-center construction could tip the economy into recession (⁸). At the same time, real deals kept landing. Meta was named as the company behind a 3,000-acre site in Kentucky, with a 40-year property-tax break (⁹). There were new leases in Sydney and Mumbai too. Today's split: the people doing the building are still spending, and the people judging the spending are nervous. Vertiv (VRT), which makes cooling and power gear for data centers, is the name most exposed if that mood turns into actual budget cuts. That's why we cut it a notch.

Politics: demand is moving to places that still say yes. Local resistance is growing. Michigan's congressional races are now fighting over data centers. A major conservation group backs a moratorium. And the backlash is reaching federal permitting reform (¹⁰). Ohio's Supreme Court is weighing a challenge to AEP's data-center tariff, the rule that makes big data centers pay for most of the power they reserve even if they use less (¹¹). The pattern across days: projects shift to friendly places like Kentucky, Wyoming and Ohio's Flagship site. But those places sit on grids that just hit record peaks. Demand isn't going away. It's piling up wherever approval is easiest, and that's often where spare power is thinnest.

Materials: copper's short-term story weakened today; the long-term one didn't. Copper fell for a third day. A hot US inflation report and BHP's deal to avoid a strike at Escondida, the world's biggest copper mine, both weighed on the price (¹²). The ICSG, the industry's main forecasting group, expects the global surplus to more than triple by 2027 as new smelters open (¹³). That pushes against the "copper deficit" thesis for the next year or two. On the other side, Antofagasta's weak 2027 production outlook means less supply (¹⁴). And Anglo American says tech companies have approached it about buying stakes (¹⁵). The deeper supply crunch shows up in transformer steel. Grain-oriented electrical steel, the special steel inside most transformers, is becoming a trade fight in Europe (¹⁶). The takeaway: the real bottleneck is processed parts like transformers and refined steel, not raw copper. Southern Copper (SCCO) can handle a softer price because its costs are low. Freeport (FCX), with higher costs, can't.

What Would Prove Us Wrong

• Hyperscalers cut spending plans in their late-October earnings. Microsoft, Alphabet, Amazon and Meta report soon. If even one lowers its 2027 capital-spending guidance, the Gartner warning stops being talk. That would hit VRT hardest, then GEV, because turbine orders depend on projects like Flagship actually getting built.
• Copper falls below $10,000 a tonne and stays there. That would mean the surplus forecast is winning over the scarcity story, and would force a cut to FCX first, then SCCO. Also watch whether the US tariff decision lets the roughly 1.5 million tonnes stockpiled in the US flow back into the global market.
• Utilities pick the cheaper option. If AEP or another utility orders more Mainspring units or gas engines while Bloom gets no repeat orders at scale, the BE thesis loses the most. On-site power would still be growing, just not through Bloom.

Thesis Impact

• BE | Conviction: UP | Surprise: MED | AEP plans to spend about $4B on a 702 MW Bloom fuel-cell project in Wyoming, under contract to Google. That is a large new data-center order and it CONFIRMS pillar 1 (power on site, skipping the grid queue). It also brings a big new buyer: a utility. One caution: in the same deal AEP agreed to buy up to 1.6 GW of Mainspring linear generators, a rival way to make power on site. That partly CONTRADICTS the "no cheaper competing tech" assumption, so the move up is modest. | ¹
• VRT | Conviction: DOWN | Surprise: MED | Gartner calls AI data-center spending "unsustainable" and flags a $3.5T write-down risk. BlackRock's CEO warns that a pause in US data-center construction could cause a recession. Neither is an actual spending cut yet. But VRT is the name most tied to hyperscaler spending and carries a premium price, so this CONTRADICTS pillars 2 and 3 at the margin. Microsoft's denial of cost cuts is old news and doesn't offset it. | ⁷
• GEV | Conviction: UP | Surprise: MED | PJM will study SoftBank's Ohio "Flagship" project: about 10 GW of data-center load paired with about 10.2 GW of new gas generation, plus 765-kV lines. This is a single huge gas-turbine demand signal and CONFIRMS pillar 1 (gas as the fast firm-power answer). It is only at the study stage, so the move is small. | ²
• PWR | Conviction: HOLD | Surprise: LOW | The same Ohio Flagship project needs new 765-kV transmission built by AEP Ohio. This CONFIRMS pillar 1 (transmission is the step that connects new load), but it's already priced into a 0.88 prior. | ²
• Own-the-Bottleneck | Conviction: HOLD | Surprise: LOW | Grid operators are now writing rules just for big new loads. PJM is proposing ride-through rules for large computing loads, meaning they must stay connected through voltage and frequency swings. It's also planning advance warnings when the grid is tight even in mild weather. BPA is proposing an "open season" to connect large loads faster. All of this CONFIRMS pillar 1 (power is the binding limit) and matches the cross-domain thread that demand is landing on grids with no spare power. The Gartner and BlackRock warnings are the counterweight to watch. | ⁵
• SCCO | Conviction: HOLD | Surprise: MED | Copper fell for a third day. The causes were a US inflation shock and easing strike risk in Chile, since BHP reached a deal to avert a strike at Escondida. Combined with the ICSG forecast that the copper surplus more than triples by 2027, this CONTRADICTS pillar 1 (deficit) in the near term. Two items cut the other way. Antofagasta's weak 2027 output guidance means less supply. And tech giants are seeking stakes in Anglo American, which CONFIRMS scarcity. Net: mixed, and SCCO's position as the lowest-cost producer softens the hit. Watch whether the price heads toward the $10k/t trigger. | ¹²
• FCX | Conviction: HOLD | Surprise: MED | The same copper selloff plus the surplus forecast CONTRADICTS the deficit pillar. FCX is hit harder than SCCO because its higher costs give it more exposure to the price. Antofagasta's guidance also blamed higher diesel prices, a cost pressure every miner shares. The prior is already low at 0.49, so no further cut until the price breaks lower. | ¹⁴

Inflection Radar

[emergent] State Grid Decentralization | Former FERC leadership arguing for state-level control of Integrated Resource Planning (IRP) suggests a structural shift away from federal mandates, potentially favoring regional utility autonomy over national frameworks. | Touches: NEW | ¹⁷

[emergent] Compute Bottleneck Automation | Academic focus on AI designing chips (AI-designed silicon) and advanced inference optimization techniques (e.g., error compensation, structured pruning) signals a race to solve compute capacity limits beyond traditional scaling laws. | Touches: NEW | ¹⁸

[emergent] Strategic Material Stockpiling | Reports linking geopolitical tariff threats (e.g., US tariffs) directly to the accumulation of critical industrial materials like copper in national stockpiles, signaling commodity risk pricing into infrastructure planning. | Touches: NEW | ¹⁹

[emergent] Hyperscale Compute Infrastructure | Major cloud providers (e.g., Oracle) are actively pursuing approvals for natural gas pipelines to power data centers, creating a visible, immediate dependency link between AI compute demand and legacy fossil fuel infrastructure. | Touches: NEW | ²⁰

[emergent] Advanced Embodiment Control | Academic research focusing on scaling open-world, egocentric data and developing unsupervised actuator networks for humanoids suggests a transition from simulation-based control to robust, real-world physical dexterity. | Touches: NEW | ²¹

[emergent] Foreign Military Autonomy Procurement | Multiple signals show foreign navies (Hellenic Navy) and defense contractors securing contracts for advanced, autonomous unmanned systems (USVs), indicating a global shift in military procurement toward non-crewed assets. | Touches: NEW | ²²

[emergent] Regulatory Data Capture | FERC soliciting public comment on mandatory information collections (FERC-725A, 725L, etc.) signals a proactive increase in regulatory data requirements across the energy sector. | Touches: NEW | ²³

[emergent] Small Modular Nuclear Deployment | The NRC providing weekly public notice updates on phased construction permit applications for SMRs indicates a concrete, scheduled regulatory path toward next-generation nuclear power deployment. | Touches: NEW | ²⁴

[emergent] Geopolitical Space Comms | Turkey's development of the Astralink broadband constellation signals increasing national competition and capability building in global satellite communications infrastructure outside of established Western players. | Touches: NEW | ²⁵

QA & Caveats

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Sources

1. AEP in deal to buy up to 1.6 GW of Mainspring linear generators utilitydive.com
2. PJM plans to study SoftBank’s Ohio AI project under state agreement approach utilitydive.com
3. PJM, ERCOT, and SWPP all set peak load records this summer eia.gov
4. rtoinsider.com rtoinsider.com
5. rtoinsider.com rtoinsider.com
6. rtoinsider.com rtoinsider.com
7. Gartner warns AI data center capex is ‘unsustainable’ as $3.5T write-down risk looms - Fierce Network news.google.com
8. Pause in US data center construction could lead to recession, BlackRock CEO warns datacenterdynamics.com
9. Meta named as company behind 3,000 acre data center project in Mason County, Kentucky datacenterdynamics.com
10. The Data Center Backlash Is Coming for Permitting Reform heatmap.news
11. rtoinsider.com rtoinsider.com
12. Copper price falls for third day as US inflation shock, easing Chile strike risk spur selloff mining.com
13. Global copper surplus to more than triple by 2027: ICSG mining.com
14. Antofagasta shares sink as 2027 copper outlook falls flat mining.com
15. Tech giants come knocking for a piece of Anglo American as copper scarcity bites, Wanblad tells FT mining.com
16. Transformer Steel Becomes a Trade Flashpoint in Europe spectrum.ieee.org
17. rtoinsider.com rtoinsider.com
18. Ricursive Intelligence is betting on AI-designed chips to help solve the compute crisis techcrunch.com
19. How Trump’s Tariff Threat Built a US Copper Stockpile and Surplus - Global Banking & Finance Review news.google.com
20. Oracle renews attempts to secure natural gas pipeline approval for Project Jupiter data center - report datacenterdynamics.com
21. $\lambda_0$: Scaling Open-World Egocentric Human Data for Humanoid Loco-Manipulation arxiv.org
22. Hellenic Navy Tests SARONIC’s Corsair USV Ahead of Major Order navalnews.com
23. Commission Information Collection Activities (FERC-725A, 725L, and 725Z); Comment Request; Revision federalregister.gov
24. SMR, LLC; Palisades SMR, LLC; Pioneer Units 1 and 2; Phased Construction Permit Application-Limited Work Authorization federalregister.gov
25. Turkey’s Astralink broadband constellation gets early funding, prototype to launch 2028 spaceintelreport.com