Everyone who follows the tech industry must be glued to their screens and social media platforms tonight, closely watching the results of the mid-term elections. As my colleague Shane Burke writes below, more than 20 gubernatorial candidates are advocating for a pause in the development and construction of data centers. At the same time, Proposition 40 in California also deserves continued attention.
However, for those in the tech industry who are concerned about the election results, please keep one thing in mind: regardless of the outcome of tonight's election, it will not change the current relaxed anti-monopoly regulatory environment. This relaxed environment originated from the Trump administration, not Congress.
This means that companies still have a two-year window to complete various transactions, after which the anti-monopoly stance is likely to shift. This also explains why mergers and acquisitions in the tech industry have been so intense recently, similar to a classic television game show where participants must grab as many items as possible from supermarket shelves within a set time limit.
On Monday, there were reports of a deal between Myriel and朗美通; last week, there were transactions involving DoorDash and Instacart; in June, Fox acquired Roku; in addition, there were numerous other deals. The wave of mergers and acquisitions is not limited to the tech industry, such as the deal between Skydance Media and Warner Bros. Discovery Group. According to market data firm Dealogic, the total value of announced deals so far this year has reached $2.6 trillion, an increase of 66% compared to the same period last year.
Salesforce is one of the most aggressive buyers in this round of mergers and acquisitions, completing deals worth several billion dollars almost every one or two weeks. On Monday this week, Salesforce acquired Cresta, a call center automation software vendor, for a transaction amount we previously reported to be 2.7 billion dollars. Also on Monday, Salesforce completed its acquisition of Listen Labs; both parties announced the deal in September, but the transaction price was not disclosed at that time.
Last month, Salesforce signed a final acquisition agreement to spend $5.7 billion on acquiring the customer interactive marketing platform Braze. In September, it completed the acquisition of Fin, an agency company for customer AI, for $3.6 billion. Over the past 12 months, Salesforce has spent or committed to investing at least $25 billion to complete 8 acquisitions, with nearly each transaction exceeding $1 billion in value.
Without a doubt, Mark Benioff, the CEO of Salesforce, can be regarded as a "fanatic practitioner" of mergers and acquisitions. In the 2010s, he drove the company's growth through one acquisition after another, with each one becoming larger in scale. The pinnacle of his efforts was the acquisition of Slack in 2021 for $27.7 billion.
However, that round of mergers and acquisitions dragged down the company's stock price, ultimately leading to pressure from aggressive investors, forcing Benioff to slow down his acquisition pace and turn to focusing on efficiency and profitability instead. This brought about a significant change: in fiscal year 2026, free cash flow as a percentage of revenue rose to 35%, compared to only 20% in fiscal year 2023. This means that the company can generate over $14 billion in cash flow each year, which not only allows for large-scale share repurchases but also provides ample cash reserves for future acquisitions.
It is worth noting that Salesforce has recently made almost all of its acquisitions in cash, which is a stark contrast to the model of acquiring through stock issuance that was prevalent before 2020. Benioff clearly realized that stock-based acquisitions can lead to dilution of equity. Earlier this year, he stated, "We now know better how to conduct acquisitions that not only enhance business profits but also do not cause equity dilution for investors." Of course, whether using cash or stocks to pay for acquisitions, the ultimate goal is to generate returns. As for this point, there is still no conclusion yet.
Several key states that data center developers need to pay close attention to
On election day, voters in more than 20 states will cast their ballots to determine the future direction of data center construction in their regions.
Currently, the gubernatorial elections will have the greatest impact on this issue. As we reported earlier, candidates calling for a pause in data center construction are expected to win in up to 15 states, including Michigan, Ohio, Texas, and Oregon. There are also many candidates who have pledged to introduce other industry restrictions, such as protecting residents' electricity costs and strengthening environmental regulations.
Such regulatory restrictions will slow down the rapid pace of data center construction, increase construction costs, and add more uncertainty to the huge AI investment return prospects of large technology companies.
The electoral campaign in Texas is the most intense, as the state is home to some of the world's largest data center projects. During the gubernatorial race, Democratic challenger Gina Inohosa stated that she would implement stricter construction suspension orders than the current governor, Greg Abbott, and would wait until state legislators establish permanent regulatory standards before proceeding.
The election situation in Georgia is closely contested, and Democratic candidate Kesa Lance Bortones has called for a suspension of construction projects to assess the economic and environmental impacts. Data from CBRE shows that the Atlanta metropolitan area is already the largest market for data center construction in the United States, and a statewide suspension order would directly impact this fastest-growing industry region.
The electoral campaign in Florida is also very intense. The political action committees associated with Anthropic and OpenAI, led by Greg Brockman, have invested over 4 million dollars to support the Republican candidate Byron Donalds; the Democratic candidate David Jolly, on the other hand, advocates for a moratorium on data center construction.
None of the three states mentioned above has elected a Democratic governor since the 1990s, so if the Democrats are able to win any one of them, it would be a historic achievement.
The same is true for the Alaska governor election, where three Republican candidates and one Democratic candidate are competing. The Democratic candidate, Jonathan Kreis-Tomkins, has proposed to suspend the construction of data centers and introduced a series of AI regulatory rules to hold companies accountable for any resulting damages. Currently, he has a high chance of winning.
Regardless of the final outcome, this election will shut some doors to development in the data center industry, and we will soon see the results. – Shane Burke
