November 2026: Talking Trump & Tech

Steve Hiscock

Hello to everyone listening to our podcast, The Active Investor with SGH. I’m Steve Hiscock, the chair of the company, and it’s my pleasure to be your host again for today’s episode. In today’s podcast, we’ll look at what happened in October 2026 and discuss the outlook going forward, including what happened in the US overnight.

This podcast is being recorded on the 5th of November 2026. We’re also fortunate to have Tim Gough join us to discuss data centres, AI, and recent floats, so that’ll be really interesting. More on that later. So Rob, let’s just briefly cover off on the market, what happened in the month, and then we’ll go into the US elections.

So over to you, what happened?

Rob Hogg

Thanks, Steve. What did happen? Look, continued volatility, although we certainly can say that often. But really the most volatility is in the bond market, and bond market measures of volatility are the highest they’ve been since April last year when Trump did his Liberation Day tariffs.

So that’s where all the volatility is. That’s where all the changeability has been. We’ve spoken before about why that is. It’s not inflation; it’s more about the supply of bonds. And of course, we’ve had quite a significant knockdown in the French bond market for domestic political reasons.

But again, it was all about bonds. Last month, however, we saw bond yields fall, whereas the month before they’d risen a lot. Tech is the other area where there’s enormous volatility, where the market seems to be increasingly questioning just what sort of return investors and corporates will get from the huge amount of investment that they’re doing in AI-related infrastructure and so on.

The other key area of variability in the last month was oil, and that’s really, as we know, all about the Middle East and what Trump and the Iranians say about what they might be likely to do. So volatility in those three areas- bonds, tech, and oil- led to quite a bit of variability in terms of returns.

So equity markets across the globe varied in their returns. Those in Asia with higher tech weightings did really poorly. Here in Australia, the story was really all about the RBA and what they might do as we moved into November, which we now know, of course, was a rate hike, in the first week of November.

Steve Hiscock

Excellent, Rob. That’s a great summary. And really the thing that everyone’s discussing today is the result of the midterm elections, and let’s spend a bit of time on that before we talk with Tim. So the Democrats took the House and the Senate, and many people are saying it was one of the biggest swings in modern US history.

On some numbers, the largest swing in 75 years. I guess my first question is, yes, we expected a swing back to the Democrats. I don’t think anyone disputed that. But why do you think there was such a big swing back to the Democrats?

Rob Hogg

Look, as you said, we were expecting. It was certainly in the polls, but we do know the polls have not always been a great guide.

But this time, perhaps they didn’t suggest quite as significant a swing as we ended up getting, as you said, the biggest in 75 years. Why? Well, interestingly enough, Vice President JD Vance has already blamed the Iran war for the very, very poor showing of his party, the Republican Party. It’s easy to see why, and it’s very likely absolutely a significant part of the reason.

So higher gas, as they call it in the US, gas prices, and just broader economic uncertainty. These were among the issues cited for what was a very, very significant swing last night our time.

And in terms of market reaction, one of the key moves overnight was the oil price down around 8% or thereabouts, and that seems to be, or is possibly because, with the Democrats now in control of both the House and the Senate, as you said, it seems more likely that the war in the Middle East will be curtailed rather than extended.

And certainly, the chances of any sort of boots on the ground or invasion or so on and so forth have very likely declined quite significantly. So I think we’ve seen this huge rally in the oil price, and that’s probably driven a lot of the market reaction we’ve seen. Equities are stronger: the Dow is up about 3%, and the S&P is up around 1.7%.

A very broad-based rally. Only a couple of sectors were weaker. Energy in particular; that’s all about the oil price. US dollar is a little bit weaker. One thing that doesn’t get a lot of attention is what’s happening outside the US, and one of the most striking things was very significant rallies in European bond markets.

So European bond yields fell by almost 20 basis points in some cases, certainly 10 to 15 to 20 across Europe, and the French market in particular rallying very, very sharply. And I think that may well have something to do with thoughts about the implications for things like tariffs and so on as a result of the results last night.

Steve Hiscock

And AI got hit as well.

Rob Hogg

Yeah, there’s a lot of variability about AI-related stocks. There had been speculation there might be some federal regulation or legislation. That still seems unlikely. More likely, however, are changes at the state level, where state-based legislation is key to things like permitting and so on.

Ohio and Georgia, for example, have spoken about moratoriums on data centre builds. So that’s probably the biggest potential change to the nature of the AI trade in the US, not some big federal level regulation on the sector more broadly.

Steve Hiscock

So the Democrats control the House and the Senate. What does that actually mean?

Trump’s still president, so what does that mean for legislation? What does it mean for markets if you’ve got, potentially, a hostile House and Senate?

Rob Hogg

Well, it leads to or is most likely to lead to, what is often described as gridlock. So you might describe Trump as a lame duck president now, certainly on domestically focused policy.

He still has a lot of freedom on a foreign policy basis, which is where he’s expected to be a little more active than on a domestically focused legislative program, where, as you say, the control of the Senate and the House by the Democrats suggests that not a lot is going to change on a large scale sort of basis.

So we’re likely to see a bit more argy-bargy, if you like, on spending bills. You’re likely to see the Democrats focus on things like healthcare spending, where there were cuts in 2025. That’s where most of the focus will be. Debt limits will come up in the United States, and perhaps the Democrats will attach to those spending programs and those ceilings legislation, as we say, related to healthcare, perhaps related to Iran.

But broadly speaking, we’re looking at two years where there won’t be much in the way; there won’t be anything in the way of significant legislative change. Now, that is not necessarily a negative. Indeed, US markets tend to do pretty well as a rule during periods like this, where there’s a split in the control of Congress relative to the administration.

Steve Hiscock

What does it mean for Trump’s policy that he’s requesting trillions from the House, isn’t he?

Rob Hogg

Well, things like that will be very significantly curtailed in all likelihood. And there’ll be, as you say, much more argy-bargy. So healthcare-related, legislation, renewables perhaps, defence even, these are some of the areas that could well be contentious, where the Democrats now have a deal more sway over what happens.

Steve Hiscock

As you say, it’s not necessarily a negative policy.

Rob Hogg

No

Steve Hiscock

Well, it may be policy gridlock. It’s likely to lead to a more stable environment where unexpected things don’t necessarily happen because they can’t.

Rob Hogg

No, that’s right. And look, I think it’s worth bearing in mind, I mean, obviously the focus this morning as we speak is very much on these midterms. But really, the issue in the United States, the key constraint, has been that inflation has been too high for too long: nothing like the situation in Australia, but not where it should be.

So that inflation outlook, that, that remains absolutely critical and really probably more important than anything likely to come out of Washington given the nature of the gridlock. So on that count, if the oil price decline last night, that 8% fall, is any guide at all to potential prospects in the Middle East, and more broadly on the oil price, that is possibly going to be the most positive thing that comes out of what has occurred overnight.

Steve Hiscock

Yes. I guess against that is the increasing worry people have got about debt funding on the AI spend. And to me, that’s a big cloud. But do you have any thoughts on… because there literally have been hundreds of billions raised with a cash flow issue.

Rob Hogg

Yeah, no, you’re absolutely right, and that is one of the biggest areas of volatility and change that we’ve seen in the US equity market: the rotation there and an increased questioning by investors and corporates about whether or not the huge amounts of debt that have been raised to finance CapEx will actually see a return commensurate with that.

And increasingly, the market is starting to vote that some of the earlier optimism may have been a little bit overdone, as it were. I suspect this will pan out with some of those spending expectations being wound back. We’re likely to see, as we were saying before, at the state-based level with a data centre build-out and so on, that in a sense we’re gonna have, if you like, use an analogy of some sand in the gears.

So that’s likely to slow down the process as well. You could argue that it’ll be somewhat self-correcting as a consequence of downward revisions in the return on the investment, but also what is likely to be a slightly less conducive environment on a state-by-state basis to some of the build-out in any case.

Steve Hiscock

Well, thank you, Rob. That was excellent. And we will see in the next week or so what happens to markets as they digest everything and the consequences, so it’ll be interesting to see. On a sad note, I believe David Jones was placed into administration this morning, so that’s the end of an icon.

So goodbye to DJs. It’s not- nothing to do with today’s podcast, but I, we should all, have a tiny moment of silence for the end of one of the greatest retailers Australia’s ever seen. So Rob, thank you for that. I’m going to hand over to you now to talk with Tim.

Rob Hogg

We’ll be chatting about the volatility we’ve seen in AI-related stocks and sectors here in Australia.

We’ll be talking about NextDC, we’ll be talking about Firmus and just how we think about the nature of AI-related infrastructure assets.

Steve Hiscock

Excellent. Well, I’ll hand over to you then.

Rob Hogg

Thanks, Steve. It’s my pleasure to introduce Tim Gough, one of the portfolio managers in the SGH individual portfolios area.

Tim’s clients include individuals, charities, various other not-for-profits, faith-based bodies, schools, and scholarship funds. So he works very closely with these types of clients, building very, very particular bespoke portfolios.

Now, we really were very keen to have Tim come in and speak at this podcast to talk about the incredible volatility we’ve seen in the AI-related sector, both globally but also here in Australia and in many ways, the volatility here in Australia has been seen most in the area that includes data centres. So Tim, thank you very much for joining us. If I can hand over to you, please.

Tim Gough

Thanks, Rob. Great to be here. Great to be back on the podcast again with you. Yeah, data centres are incredibly topical at this point.

And you’re right, they’ve been incredibly volatile over the last few months. They’ve certainly impacted how markets and portfolios are performing. First, I’d like to say we think AI is going to be an incredibly transformative technology, and it’s definitely here to stay.

We think the core premise of the AI cycle remains intact: demand is far outstripping supply. However, you know, several challenges have emerged, and this has really been a result of the pace and the scale and the pickup in planned expansion and how that has evolved.

Key factors like access to power and water, and access to capital, have been highlighted, and the sheer scale of the expansion has led investors to question the timing and level of returns available on these assets. This has been amplified in recent months, as you’d be aware, by rising long-term bond yields and interest rates.

Focus has returned to the leverage and debt used to build these assets. Another factor would be the social license. Communities’ response has increased as the focus has shifted to noise and how much power and water these sites use. And it’s fair to say that, you know, government policy’s been forced to play catch up in this respect.

The risk here, of course, is that you either build it or you lose it, and it’s a fast-evolving sector; if you don’t want to build them in Australia, then they’ll be built elsewhere, such is the demand. All of these things have contributed to the pullback in share prices we’ve seen over the last quarter.

Rob Hogg

Tell me, Tim, are all data centres the same?

Tim Gough

Yeah, it’s a good question, Rob, and I think at times the market does treat them all as the one type of asset. But essentially data centres are essential infrastructure, and they’re an essential part of the AI ecosystem.

This applies particularly to the network and the co-location facilities that securely connect customers with cloud services. As you say, it’s important to distinguish between the types and quality of data centres in the AI supply chain. We prefer the co-location and traditional data centres that serve enterprise customers, such as providers like NextDC and Infratil’s Canberra data centres. These businesses have long-life assets of 15 to 25 years with long-term customer contracts.

The other side of the data centre spectrum right now is the neo clouds, and we’re more cautious in that space: the so-called AI factories. These businesses buy chips, mostly Nvidia GPUs and lease the computing power as a service to AI developers, companies like OpenAI and Meta, and they’re used for model training and inference.

We see the neo clouds as considerably riskier. They’re essentially commodity businesses that sell GPU compute on relatively short-term contracts. Beyond that, their relationships with Nvidia are largely similar, and that’s little that sets one neo cloud apart from the other. Their competitive position depends on how easily and cheaply they can access power and capital, two of the biggest constraints we’re now seeing in the sector. You know, relatively, they’re shorter life assets and shorter life contracts, so we’re less attracted to them.

I guess on the Neocloud side space, Rob, you’ve also seen we’ve had the Firmus IPO that came and went in October. My comments on that would be Firmus was always going to be a stretch for us.

The sheer scale and growth ambition meant that the call on capital was always going to be huge. But the hardest question facing us on Firmus was: was it really a good company? The prospectus didn’t give us enough information to make that determination. We felt it was pretty light on detail in some key areas.

As a provider of GPU capacity to large hyperscalers and large language models, Firmus is exposed to those much shorter asset lives we discussed; the contract terms are shorter than in traditional data centres. But also the demands on power and water are greater.

One of the biggest challenges was with their growth ambitions, which were evolving incredibly quickly. I mean, the company was very different at the IPO date from the one which did the rounds back in May. The value of that growth was, or the value of the IPO essentially was, all in the future construction and future contracting to be built.

At IPO, it was hard to put a price on what the company would actually be worth. Fair to say, though, rising bond yields and the price of debt have increased the focus on transparency and return on capital. And the Firmus IPO was really at the heart of that.

Rob Hogg

Can you tell us, Tim, one of the things the market, I think, is trying to do is make a comparison between these types of infrastructure assets and your typical sort of REIT asset. What’s your thinking there?

Tim Gough

Yeah, it’s a good question. We’ve always put data centres in the same bracket as property being, long life, long duration assets.

The big difference we’re seeing here, though, is the level of disclosure you’re getting on data centres versus the level of disclosure you’re getting on your typical REIT or property stock, which tends to be for the REITs at an asset by asset level. If you think about it, your typical shopping centre has lots and lots of shops in it, and therefore lots and lots of contracts.

Your typical data centre has a much higher concentration of clients, and therefore they call out commercial in confidence when making those disclosures. This is making it harder for the equity market to really get into the nuts and bolts of the valuation.

Rob Hogg

Now, in this sector, obviously, we’ve had some very sharp moves with share prices of quite significant stocks like NextDC.

Can you give us a bit of an insight into what drove the major fall in that share price in October?

Tim Gough

Yeah, thanks, Rob. Really interesting development. In our view, it highlights the risks that exist even when you have both customer contracts and construction contracts lined up. In short, for NextDC, access to power at its M3 site in West Footscray, Melbourne, has been paused or delayed due to community pushback against the transmission provider, Jemena.

The delays, combined with the upcoming Victorian election, have put the delivery timeframe for that contract at risk. And again, as we talked earlier, debt is increasingly at the centre of this. The delay in delivering that contract is putting contracted revenue and earnings at risk, which in turn is pressuring the balance sheet.

The sheer scale of the growth pipeline means access to capital and a strong balance sheet are essential in this sector. We think, however, that NextDC is oversold. And while the company has provided limited disclosure around this asset, there will be enough time to put appropriate workarounds in place.

But the market needs clarity on these to price them correctly. Given the contracted growth profile, I’d be really surprised if we saw banks pulling capital or pulling lending away from this sector, given the long-term nature of the contracts and the long-term nature of the customers.

This is a great setup that banks will typically like to lend to. So we think that appropriate solutions will be found.

Rob Hogg

Tell me, as we sit here on Thursday morning, November 5, that this is the morning after a very significant event last night regarding the stock. Can you fill us in on that?

Tim Gough

Yeah, very interesting. So last night, and again, I think this supports our thesis of why we like this asset class and why we think NextDC was oversold. What you saw was a consortium: two organisations stepped into the market and built a strategic stake of close to 10% in Next overnight, at a 45% premium to yesterday’s closing share price.

The joint venture is between Digital Realty and Goodman Group. In our view, this effectively underpins the value of the assets Next has and puts the company in play to some degree. It’s another example of why investors should think about active management and their managers’ ability to move quickly.

It certainly makes our buying in the last couple of weeks look pretty good.

Rob Hogg

Well, that sort of leads us to talking about what indeed the key stocks are in the sector for you.

Tim Gough

As you know, we’ve favoured the infrastructure side of the sector, and certainly Australia’s limited in terms of the exposure you can get.

We’ve got lots of software companies, but not too many of the large hyperscalers. But our focus has been on the traditional data centre providers like NextDC and Infratil, the owner of Canberra Data Centres. Long life assets, contracted revenues and in a market where demand is exceeding supply.

They’ve got diversity in their customer bases. They do contract with all of the major hyperscalers, and they don’t build on speculation. They build on contracted arrangements. As you can see, though, things can happen. We also like Megaport. Megaport’s a little bit different.

Always like to describe it as bringing connectivity to the marketplace. And whilst it’s not a data centre, it does contract. It’s data centre neutral in that it provides connectivity services globally to a pool of data centres. More recently, it’s moved into a slightly more capital-intensive business.

It bought the Latitude business in December last year. And so now Megaport is providing both network capacity, compute and storage as an integrated AI infrastructure offering. It’s doing this with relatively short-term paybacks on the capital employed. So we also like Megaport.

Rob Hogg

Well, thank you very much, Tim. We really appreciate you taking the time to come and speak with us about a sector that has been really very much at the centre of the market’s turbulence over the last month or so. Thanks for your time.

Tim Gough

Thanks, Rob.

Steve Hiscock

Great. Rob and Tim, thanks so much for both of your time. And that brings us to the end of today’s episode.

We looked at what happened in October. We then looked at what happened overnight in the US midterm elections. Tim and Rob had an excellent chat about AI and tech stocks. And as always, we are living in an extremely uncertain environment.

We hope you enjoyed today’s episode.

*Transcript has been edited for clarity.