As Jeopardy host Ken Jennings said after Tuesday’s midterm elections: “All my exes now live in Blexas.” Democrats won or led in every statewide race in Texas as of yesterday, turning the Lone Star State blue (hence Blexas) for the first time in three decades.

The upset victory in the gubernatorial vote by Democrat Gina Hinojosa, who has pledged to hit the brakes on new data center approvals, could alter the trajectory of the state’s nation-leading buildout. But Texas’ AI infrastructure buildout isn’t buzzard bait just yet.

Rodeo Circuit Breaker

Until earlier this year, data center development in Texas was as hot as a two-dollar pistol. The state’s vast supply of habitable and usable land combined with abundant rural and suburban real estate made it ideal for new projects. A deregulated electricity market, its own independent power grid, and direct access to liquified natural gas allowed developers to negotiate large-scale power deals and build on-site energy sources. Throw in a pro-business regulatory climate along with no traditional state taxes, and you’re fine as cream gravy.

With all those favorable factors, analysts at global real estate firm JLL earlier this year tipped Texas to leapfrog Virginia as the world’s largest data center market by 2030. Among those developing major campuses are Amazon, Google, Meta, Microsoft, OpenAI and Vantage. Recent months, however, saw momentum stall. Texans voiced increasing concerns about air quality, noise pollution, electricity and water bills. Polls showed a majority of them oppose having data centers in their communities. Politicians on both sides of the aisle responded. In September, outgoing Republican Governor Greg Abbott ordered a moratorium on new data center permits until the state grid operator completed an audit of existing applications. This put almost one fifth of the 253-GW data center development pipeline in all the United States at risk of delay. Hinojosa, set to be inaugurated on January 19, pledged to go one two-step further. She campaigned on a statewide moratorium on new data center approvals until the Texas Legislature passes a slate of new regulations:

• Analysts at Jefferies wrote that a Hinojosa victory would mean greater political risk for data centers as it could translate to “tighter rules around who pays for grid infrastructure, water use and data center tax incentives.” However, they added it’s “more likely to increase development costs and requirements than materially restrict the Texas pipeline.”
• At the federal level, Yorkville Ives Managing Director Dan Ives wrote Wednesday that “there is no way to sugarcoat that Democrats taking control, especially over the Senate, will create some major hurdles for AI and tech legislation.” He forecasts the 800 to 1,000 data centers currently planned across the US will face delays and that 10% of them “will not happen now.”

Portfolio Swings: The election results slammed cloud providers CoreWeave and IREN, which closed down 9.9% and 11.2%, respectively, on Wednesday. Data center cooling and temperature systems makers Vertiv and Modine fell 12.9% and 21.4%, respectively. But post-election certainty gave the more diversified Big Tech hyperscalers, which are financing the AI buildout, a boost: Alphabet, Amazon, Meta and Microsoft rose 3.3%, 6.1%, 1.4% and 6.7%, respectively.

CVS is taking a pill-splitter to its business, separating its 9,000 retail pharmacies into one company and its insurer Aetna plus its pharmacy benefit manager Caremark into another. The historical unwinding will see CVS’ $117 billion healthcare megacompany split in two — will the pieces break apart cleanly or get crushed?

Both companies, CVS Pharmacy and CVS Health, will be publicly traded. CVS Pharmacy will own the parts of the biz that let shoppers buy a fresh tube of mascara while picking up their multiple nasal-spray prescriptions and if they’re up to it, getting a flu shot at CVS’ back-of-store MinuteClinic operations. In addition to Caremark and Aetna, CVS Health will house senior care provider Oak Street Health, in-home health firm Signify Health and CVS’ specialty-drug pharmacy.

For CVS, which beat Wall Street’s expectations for eight quarters in a row as of yesterday morning, two may simply be better than one.

Not Clowning Around

CVS has been bulking up its healthcare company for the last 20 years, first agreeing to buy Caremark in 2006, a combo its then-CEO Tom Ryan said would “help manage the costs and complexities of the US healthcare system.” From there, CVS made a series of acquisitions including defunct Longs and later Rite Aid stores. In 2018, CVS bought Aetna for $78 billion — its CEO at the time, Mark Bertolini, mirrored Ryan, saying the two companies together would “eliminate the unnecessary complexities that frustrate today’s healthcare consumers.”

But in 2024, Aetna became a drag on its wider business as spiking medical costs ate as much as 95% of premiums. CVS slashed its guidance three times over the next six months. The fix: CVS shook up its leadership and went on a cost-cutting spree that saw Aetna exit Affordable Care Act exchanges and shutter more than 1,100 stores.

The turnaround plan was more than a Band-Aid:

• Aetna’s margins have recovered and CVS’ profits are following. CVS thinks its healthcare businesses have grown enough together that they’re ready to thrive separately — like an overcrowded Monstera split up into two pots.
• “We take this action from a position of strength,” CEO David Joyner said. Joyner added that the soon-to-be-separated businesses will maintain any products and services they’ve developed together via commercial agreements and simply no longer need to be fused at the operational level.

Side Effect: Just like layered lace camis have gone out of style since CVS bought Caremark in 2006, so too have vertically integrated healthcare businesses. Pending bipartisan legislation is threatening to split pharmacy benefit managers from pharmacies, a combination Rep. Jake Auchincloss called “an unacceptable conflict of interest.” The blue wave of Democrats that crashed on Tuesday is only expected to ramp up scrutiny of healthcare giants. CVS’ move could partially pre-empt any legislation that wants to break up its biz.

Revenue missed expectations, visits declined and US same-store sales fell year over year. None of that stopped Wall Street from woofing down a happy meal following McDonald’s latest earnings call.

Shares of the fast-food titan surged more than 6% on Wednesday following its third-quarter report, good for the stock’s largest single-day jump since April 2020. The skinny? The company still beat on earnings, in part because of success in metric system markets where the Quarter Pounder is known as a Royale with Cheese.

Supersize Me, Bitte

While same-store sales declined 0.2% stateside, they still increased 1.5% year-over-year overall for the company in the quarter due to strong international growth. Its international developmental licensed markets business, which includes the Chinese and Japanese markets, saw same-store sales growth of 4.2%. Its international operating division, which features markets including Australia and Germany, grew 1.4%.

Next for the company? CEO Chris Kempczinski told investors and analysts yesterday that the company intends to continue with its plans to reinvest in restaurants and facilities while supersizing its McValue menu:

• Shares of the company are now up more than 18% since it announced its “NEXT” turnaround plan in September, which is centered on flushing some $8.5 billion back to franchisees through 2036 to protect profitability amid remodeling and other upgrades.
• Kempczinski also said Wednesday that the company has launched a “mix and match” value meal program across 1,900 US locations in a bid to entice consumers amid stubborn inflation.

Where’s the Ribs? The Golden Arches have a few other blemishes, too. Last week, a US District Court judge in Chicago ruled that a class action lawsuit can move forward against the company in which plaintiffs allege McDonald’s misled consumers by calling its occasional menu item the McRib despite the sandwich not actually featuring rib meat. A more accurate name, according to McDonald’s own description of the item, would be McSeasoned Boneless Pork Meat, though that doesn’t quite have the same ring to it.