Following the U.S. midterm elections, increased regulatory movements regarding data centers in key regions are creating uncertainty for South Korean investments and exports. This could impact the feasibility of a gas-fired power plant in Texas, which has been selected as the first project in South Korea's $350 billion investment in the U.S.
Concerns have been raised that this could also affect exports related to semiconductors and power equipment, which are crucial for artificial intelligence (AI).
According to reports on November 8, after the Democratic Party secured control of both chambers of Congress in the midterm elections, they also won gubernatorial races in major data center investment states like Texas and Georgia. This raises the likelihood of stricter regulations on data centers.
Notably, Texas Governor-elect Gina Inohosa has pledged to halt approvals for new data center constructions until laws are established to protect residents' electricity rates and water resources. Although the previous Republican administration had already limited power grid connections and environmental permits for data centers, there are concerns that these regulations could become more prolonged.
The issue is that South Korea's investment projects could fall under this regulatory influence. The government has designated the Encinhal gas-fired power plant in Texas as the first project in its U.S. investment initiative. The project involves an investment of $22.3 billion to establish a 6.47 GW power generation facility and supply electricity to an adjacent 5 GW AI data center.
The government evaluated the project's feasibility considering the increased power demand from the expansion of data center investments. However, if local regulations tighten and delay the construction schedule of the data center, it could introduce variables affecting the timing of electricity sales from the power plant and the profitability of the investment.
Warnings are also emerging for domestic exports. According to the Ministry of Trade, Industry and Energy, semiconductor exports in October reached $56.44 billion, a 259.4% increase compared to the same month last year, accounting for about 49% of total exports. Thanks to increased investments in AI servers, computer exports surged by 496.6%, while electrical equipment exports rose by 74.0%.
If the construction of data centers in the U.S. is delayed, the demand for high-bandwidth memory (HBM), SSDs for servers, and transformers may slow down. This could also impact new orders for materials needed for data center construction, such as steel and wiring.
However, if requirements for data centers to secure their own power supply are strengthened, there may be new opportunities for orders in the power generation and electrical equipment sectors. It remains uncertain whether the regulatory tightening will lead to actual reductions in investment, so future U.S. permitting policies and the progress of individual projects are expected to be variables for domestic companies.
* This article has been translated by AI.
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