Blue Wave Could Engulf Data Center Industry

Election Day’s blue wave is set to crash into the data center industry.

In 12 states, the winning or leading candidate for governor has called for a pause on data center development, including Alaska, Georgia, Kansas, Maine, Michigan, New Hampshire, New Mexico, New York, Ohio, Oregon, Texas and Wisconsin. And in even more states, winners have also pledged other restrictions on data centers including ratepayer protections, environmental limits and the elimination of tax incentives for building the facilities.

And of the 24 incoming governors who did not call for a pause, 22 back at least one limit on data centers. Ratepayer protections, which would make sure households don’t shoulder the costs of increased power demand or energy infrastructure buildouts, were nearly universal: 34 of 36 winners support them. And 27 back restrictions relating to water usage or the environment.

Fifteen leading candidates say they would cut or end the tax breaks that states have used to court developers. (For a detailed pre-election analysis of the data center positions of state candidates, see this story.)

Governor candidates calling for data center pauses lost races in nine states, but only a few of these races were ever close. Florida was the tightest toss-up, and a key battleground on the issue. Republican Byron Donalds, who opposed a statewide pause and was backed by millions in spending from super PACs affiliated with Anthropic and OpenAI’s Greg Brockman, beat Democrat David Jolly by about a percentage point.

Some of the states where winning candidates would restrict data centers are at the center of the industry’s building plans. OpenAI’s Stargate project with Oracle has massive sites in Texas, Michigan and New Mexico. SoftBank’s SB Energy plans to build an 8-gigawatt campus for OpenAI in Ohio. Microsoft, Amazon and Nvidia have lined up Texas sites. In Georgia, the Atlanta metro area has overtaken Northern Virginia as the busiest market for data center construction, according to real estate firm CBRE.

In an interview on The Information’s TITV on Wednesday, Charles Hua, founder and executive director of Power Lines, a nonprofit focused on energy regulation, said that the election results in Ohio, Texas and Georgia were particularly noteworthy. “Those are three of the fastest growing markets for data center development for electricity demand growth and and all three saw pretty dramatic outcomes that folks maybe weren’t actually expecting,” Hua said.

How (and whether) governors put in place their moratoriums will vary—in duration, strictness and path of action. But the narrowing map could lead to higher costs and more red tape for the data center and AI industries. It introduces even more uncertainty for investors about the payoff on the large AI investments of big tech firms.

If neoclouds and other data center developers can’t turn borrowed money into revenue quickly enough, the delay could ripple, with developers paying interest on buildings that are not earning rent, lenders waiting longer to be repaid and AI companies going without the computing power they’ve committed to buy. Some deals could unravel entirely, if missed deadlines give tenants the rights to terminate. SB Energy warned in its IPO filing that permit delays could lead to this at OpenAI’s Ohio campus.

Even if data centers weren’t the deciding issue in elections, the sweep matches American public opinion. In an August poll from Pew Research Center, six in 10 U.S. adults said they would be uncomfortable with a new one operating in their area, with more than half calling them bad for the environment and half considering them bad for home energy costs. Few saw a bright side: Less than a quarter agreed they would be good for local jobs or tax revenue.

The moratoriums would join more than 500 data center pauses or bans at the local level, as shown by The Information’s ban tracker. At the year’s start, only about 40 towns and counties had bans in place. By August, the count had topped 500, driven by worries about power bills, water usage, noise and blight.