Data centers faced significant opposition during the recent midterm election campaigns, with many winning candidates pledging to impose stricter regulations or even moratoriums on the energy-hungry facilities. This trend, fueled by concerns over electricity prices, water usage, and community impact, could herald a new era of regulatory challenges for tech giants and data center developers.
Across the U.S., campaigns prominently featured data center issues, with hundreds of millions of dollars spent on television advertising. Democrats, in particular, outspent Republicans on the topic by a three-to-one margin, weaving concerns about data centers into broader affordability arguments. The midterm results saw Democrats gain control of Congress and flip at least five governorships, taking full control of state governments in five additional states, many of which are significant hubs for data center development.
A report from Data Center Watch, a project of AI security consultancy 10a Labs, indicated that a substantial majority of winning candidates for Congress and governorships had expressed support for stronger regulation or moratoriums on data centers. Among gubernatorial winners, 32 out of 34 supported such measures, with 12 advocating for outright bans or moratoriums.
In Texas, Clayton Tucker, who became the first Democrat elected state agriculture commissioner since 1986, credited his pledge to fight data center development with helping him win. Ranchers in the state have expressed concerns that data centers threaten dwindling water supplies. Similarly, Wisconsin Gov.-elect David Crowley shifted his stance during the campaign to support a moratorium and the abolition of state sales tax exemptions for data center operators.
Crowley stated he is discussing proposals that could include requiring developers to disclose water and energy consumption, ensuring community support for projects, and protecting ratepayers and taxpayers from associated energy costs. AI giant OpenAI has also called for clear rules from policymakers regarding the construction of data centers, emphasizing responsible investment and shared benefits.
The Data Center Coalition acknowledged the election results and the promises made by victorious candidates. A coalition official noted that while candidates will likely aim to fulfill these promises, there could be significant consequences, such as host communities missing out on tax revenue and tech companies facing limitations.
The election of data center skeptics introduces potential challenges for stock markets that have benefited from the AI boom. The Nasdaq saw a notable drop amid concerns that the rising cost of borrowing and potential slowdowns in data center construction could impact the AI sector, which is a significant driver of U.S. economic growth.
Morgan Stanley analysts suggested that new state regulations could lead to a division of the country into areas open and closed to new data centers. They specifically pointed to Texas's gubernatorial election as crucial, with Democrat Gina Hinojosa having vowed to block data center permits if they are not beneficial to Texans or lack community input. Ohio's election of Democrat Dr. Amy Acton also presents a "significant risk" of project delays, as she has pledged to block projects not meeting certain standards.
Local referendums also reflect public sentiment, with an analysis by Redbud Consulting showing that restrictions on data centers were approved in 44 out of 45 elections where results were complete. The AP Voter Poll revealed that approximately three-quarters of U.S. voters oppose the construction of new data centers in their communities, a sentiment shared across both red and blue states. Despite this widespread opposition, the issue was not a primary motivator for a majority of voters in the election, with only about a quarter of voters deeming AI data centers "crucial" to their vote for Congress.