Trump Adviser Flags New Cost Risk for Meta's AI Data Center Spend

What happened

Trump trade adviser Peter Navarro suggested the White House may force data center builders like Meta to absorb utility costs, citing strain on the U.S. grid from AI expansion. This emerges as Meta guides to record 2026 capex of $115-135 billion for AI infrastructure, betting on ad revenue growth to sustain operating income despite higher spending. The DeepValue report rates Meta a 'WAIT' due to risks like EU consent-model changes and legal exposures, with the thesis hinging on ad KPIs holding up during this spend ramp. Navarro's comments introduce a political wildcard that could increase operational expenses, challenging Meta's ability to meet its 2026 operating income target without further margin compression. Investors must now weigh this potential regulatory headwind alongside existing uncertainties, adding pressure to an already capital-intensive narrative.

Implication

The prospect of forced utility cost absorption adds a tangible expense risk to Meta's already high 2026 capex and opex guidance, potentially eroding operating income if not offset by revenue gains. This amplifies the DeepValue report's caution that Meta's margins are vulnerable to cost shocks, with infrastructure expenses already a key driver. In the near term, it may heighten market sensitivity to regulatory headlines, increasing volatility as investors reassess the sustainability of Meta's spend-heavy model. Longer-term, it underscores the need for closer scrutiny of political and regulatory trends impacting tech infrastructure, beyond just EU and legal risks. Ultimately, this development makes the 'wait-and-see' stance more justified, as any policy enactment could force Meta to revise guidance or face steeper profitability challenges.

Thesis delta

The investment thesis now incorporates an additional U.S. regulatory risk that could increase Meta's operational costs, directly opposing management's commitment to grow 2026 operating income despite high capex. This shifts the risk-reward balance slightly negative, as it adds another headwind to an already precarious cost structure, reinforcing the need for patience until clearer policy outcomes and Q1-Q2 ad performance data emerge.