The Department of Transportation just pulled the plug on $4 billion in federal funding for California’s high-speed rail project. The decision came after a 300-page compliance review concluded the California High-Speed Rail Authority failed to meet its obligations under the grant agreements. Sixteen years in, $15 billion spent, and not a single mile of high-speed track laid. The projected cost now sits between $128 billion and $135 billion. The original plan was $33 billion. The federal government is done waiting.
Transportation Secretary Sean P. Duffy made it clear. The FRA terminated the funding after California missed deadlines, inflated ridership projections, and failed to secure the $7 billion needed to complete the Merced to Bakersfield segment. The state’s own Inspector General flagged serious issues back in February. The FRA gave California two chances to respond. Both failed to address the core problems. The termination is final.
The fallout hits infrastructure stocks tied to rail, electrification, and civil engineering. Names like Tutor Perini (TPC), AECOM (ACM), and Granite Construction (GVA) were previously linked to contracts or bidding rounds for the California rail buildout. TPC traded at $12.44 before the announcement, down 18.3% YTD. ACM sits at $91.17, up 6.2% YTD, but analysts expect guidance revisions. GVA is flat at $43.09, with exposure to California transit projects.
Siemens Mobility, which had been tapped for rolling stock, may see delays in U.S. rail orders. Wabtec (WAB) and Stantec (STN) also face indirect pressure. The FRA is reviewing other grants tied to CHSRA. That means more clawbacks could follow. The DOJ is involved.
California Governor Gavin Newsom says the state will continue building with its own funds. His budget allocates $1 billion annually for the next 20 years. But without federal backing, the pace slows. The project is now confined to 171 miles in the Central Valley. That’s a fraction of the original LA to SF vision.
The market reaction is muted for now. But if the FRA redirects funds to other rail projects, expect rotation. Watch names tied to Texas Central, Brightline, and Amtrak’s Northeast Corridor. The money won’t sit idle.
Disclaimer: Not financial advice.
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