US voters’ sweeping midterm results could slow the expansion of data centres supporting the artificial intelligence industry, with analysts pointing to new restrictions and the election of candidates who campaigned against further development.
By Wednesday afternoon, 37 ballot measures limiting data centres had been approved in communities across California, Illinois, Maine, Ohio, New York and other states, according to an analysis by political research firm Redbud Consulting. Residents of Harwood, North Dakota, were the only voters to approve a data centre.
The elections also brought victories for several state and gubernatorial candidates who made tighter regulation of the facilities a central campaign issue. Public opposition has grown as developers seek to build rapidly to meet demand from the artificial intelligence sector.
More than twice as many Americans oppose building a new data centre in their area as support it, according to a poll conducted this summer.
Texas and Georgia in focus
Stephen Dover, chief market strategist at Franklin Templeton, predicted that the results would lead to “a slowdown in data centers being built”, alongside new regulations and higher costs for developers.
Dan Ives, a technology analyst at Yorkville Ives & Co, said the key question for investors was whether the elections would delay plans for between 800 and 1,000 data centres across the US. “The answer in our view is a clear YES,” he said in a report.
Texas is expected to account for between 25% and 30% of data centre capacity due to come online by 2030. Ives described the state as “the foundation of the AI buildout in the U.S.”
Gina Hinojosa, who defeated Republican incumbent Greg Abbott in the race for governor, proposed a temporary halt to data centre construction during her campaign. Gordon Johnson, chief executive and founder of investment adviser GLJ Research, said her victory could delay the addition of 13 gigawatts of data-centre power in Texas.
Mr Abbott had already suspended data centre approvals, meaning Ms Hinojosa could extend the moratorium without introducing new legislation, Mr Johnson said. “Texas already has a moratorium — Abbott built it. All the new governor has to do is keep it in place. She doesn’t need a new law to keep data center permits frozen,” he said.
Georgia, the third-largest US data centre market, could also see development paused after Keisha Lance Bottoms won the governor’s race. She campaigned on stopping new construction and said she would immediately sign an executive order to begin the process.
Ms Bottoms also said she planned to review tax incentives that had encouraged data centre investment in the state. “Many local governments have already taken that first step,” she said, adding that she did not expect widespread opposition to a pause.
Analysts expect a cooler market
Seema Shah, chief global strategist at Principal Asset Management, said developers could face additional requirements to invest in electrical grids and might lose tax incentives, increasing the cost of new projects.
Investment in data centres and artificial intelligence has helped drive US economic growth and stock market gains. However, Mr Dover said a slower expansion was unlikely to damage the wider economy in the long term.
“It’s possible to argue that the AI trade and data center buildout was getting overheated, and this could dampen some of the excessive investment that might not have a good return on capital, which investors have questioned anyway,” he said. “So unbridled expansion will be tempered a bit, but probably not a lot.”
Economists at Oxford Economics said moratoriums would probably delay construction rather than halt investment in artificial intelligence. A more restrictive approach would stretch the timetable for future projects, they said, while slower development over the medium to long term would not necessarily harm the wider economy.
