Political pressure mounts on data center construction
TREE NEWS reports: In the upcoming US gubernatorial elections on November 3, candidates in 21 of the 36 states holding races have voiced support for moratoriums on data center construction. In five states—Michigan, New Hampshire, Ohio, Oregon, and Texas—both major-party candidates back a pause. In three more—Maine, New Mexico, and New York—the pro-moratorium candidate leads in recent polls, while seven additional states are considered toss-ups. Together, these 15 states are home to more than one-third of the US population and include many of the country’s most active data center markets.
Major projects at risk
The political shift directly threatens high-profile projects. OpenAI and Oracle’s Stargate initiative has major sites in Texas, Michigan, and New Mexico. SoftBank’s SB Energy plans an 8-gigawatt campus in Ohio for OpenAI. Microsoft, Amazon, and Nvidia have already established operations in Texas. In Georgia, the Atlanta metro area has surpassed Northern Virginia as the most active data center market in the US, and its governor’s race is also competitive. Three incumbent governors—Kathy Hochul of New York, Greg Abbott of Texas, and Tina Kotek of Oregon—have already paused approvals for new large-scale data center projects.
Public opinion turns against data centers
The backlash stems from a rapid shift in public sentiment. At the start of the year, about 40 towns and counties had imposed data center bans; by August, that number exceeded 500, driven by concerns over rising electricity bills, water consumption, noise pollution, and environmental damage. A Pew Research Center poll in August found that 60% of American adults oppose building new data centers in their area, with more than half believing they harm the environment and half expecting higher household electric bills. Fewer than a quarter see local jobs or tax benefits. Candidates are now using data center ties as a political weapon, and even previously supportive politicians are adjusting their positions.
Market implications: winners and losers
The crackdown could have significant ramifications across asset classes. For equities, data center REITs, utilities with heavy data center exposure, and semiconductor companies that supply AI infrastructure may face headwinds as project timelines extend and costs rise. Companies like Equinix, Digital Realty, and power providers in Texas and Virginia could see slower growth. On the other hand, utilities may benefit from higher electricity prices if supply constraints persist. For bonds, increased regulatory uncertainty could raise the cost of capital for data center developers, impacting corporate credit spreads. In commodities, demand for copper, aluminum, and other construction materials could soften if projects are delayed, while natural gas demand for power generation might also be affected. In currencies, the US dollar could see minor shifts as investment flows adjust, but the impact is likely secondary. For crypto, data centers are critical for mining and blockchain infrastructure; moratoriums could accelerate the migration of mining operations to friendlier jurisdictions, potentially benefiting miners with diversified locations but raising costs for those concentrated in affected states. Overall, the trend underscores a growing ESG and political risk premium for the digital infrastructure sector.
Key takeaways for investors
- Regulatory risk is becoming a core variable for data center and AI infrastructure investments; diversify geographically and monitor state-level policy developments.
- Utilities and power producers may benefit from higher electricity prices, but face permitting risks; stock selection should favor those with supportive regulatory environments.
- Companies with exposure to affected states—such as Oracle, Microsoft, and Nvidia—may see project delays, but long-term AI demand remains intact; focus on firms with flexible site strategies.
- For crypto miners, the moratoriums could accelerate relocation, creating opportunities in regions with cheaper power and supportive policies.
