Data Centers’ ‘oh S--t’ Moment

The intensifying late-summer backlash against data centers is inspiring panic among some corners of the tech sector — amid fears that the industry is mishandling a political crisis that will stretch into 2028 and beyond.

Those worries have deepened in recent weeks as politicians across the political spectrum embraced various curbs on data center construction, with Republican Texas Gov. Greg Abbott, potential Democratic White House hopeful Josh Shapiro and Michigan GOP Senate nominee Mike Rogers being among the latest to sign on.

Some tech industry advocates maintain that the public pushback against the hulking artificial intelligence hubs is a fleeting storm generated by candidates seeking wedge issues for November. Tech companies’ best course, they say, is to avoid any political dealmaking until temperatures lower after the midterms.

But others call that foolish wishful thinking.

“AI is going to be a massive issue for the presidential election in a way that technology has never been an issue,” a representative from a major AI company told POLITICO, adding: “Nobody wants to lose their job and they’re already feeling squeezed while these very, very rich people who are richer than anything we have ever seen in the history of Earth are making more. And I think people are sick and tired of that."

The person, like others quoted in this story, was granted anonymity to speak candidly about the industry’s political strategy.

The swiftness and ferocity of the backlash has caught the tech industry on the backfoot, where it’s struggled to find an effective message that assuages voters’ worries that data centers will raise their power bills, hog their water supplies and blight the landscape. One result is the growing, bipartisan push for temporary moratoriums on data center construction, a cause that just months ago was mainly associated with progressive outliers like Sen. Bernie Sanders (I-Vt.).

The split inside the tech world is not hard to find.

“Some are viewing it as an ‘oh shit’ moment,” an AI industry advocate told POLITICO. “Others are brushing it off like it’s nothing, and those people have to get their heads out of their asses. This could go south for them, fast.”

Governors weigh in

What’s undeniable is that politicians of all stripes have decided that cracking down on data centers is in their best political interests, even if it’s a U-turn away from their previous embrace of projects they once saw as economic growth engines.

In Pennsylvania, Gov. Shapiro signed an executive order last week that would require local community approval before the state grants them permits to build, despite previously positioning his state as a hub for data center investment.

“I will not allow Pennsylvanians to be bullied by greedy developers and bulldozed by the lawyers working for these big tech companies,” Shapiro wrote on X. Some AI supporters saw that as a stunning turnaround for a governor who had earlier lured tens of billions of dollars of investments to his state from companies such as Amazon, Microsoft and Google.

Now the governor is running for reelection against Republican state Treasurer Stacy Garrity, who — unlike Shapiro — has endorsed a temporary moratorium on data centers in Pennsylvania.

In Texas, Abbott this month paused approval for new data center buildouts while state regulators and power grid operators conduct audits that will collect information including the projects’ tax breaks, ownership and proposed water use. He took that step amid complaints about the data projects from longtime conservative voters in far-flung parts of the state.

And in Michigan, Rogers came out last week in support of a one-year moratorium on building new data centers. That possibly puts Rogers on par with his progressive Democratic opponent, Abdul El-Sayed, who called for stricter standards on data center impacts throughout his campaign and later endorsed state and local moratoriums until Congress can enact national standards.

The political tide is also turning against the generous tax breaks that states had dangled for data center projects as they sought the tech industry’s presence. Even Virginia, considered the world’s data center capital, this year slapped a consumption tax on their energy usage to break a budget stalemate in a Democratic-trifecta commonwealth.

Red and blue states alike saw a flurry of activity this year looking to reel in data center incentives. Eight states in 2026 enacted legislation rolling back data center tax subsidies, while another 17 considered legislation, according to the Center on Budget and Policy Priorities, which opposes tax breaks for businesses.

In some cases, states this year targeted longstanding sales-tax exemptions for materials and technologies that data centers purchase. Maine lawmakers even tried to restrict new data centers from all state tax breaks, though Democratic Gov. Janet Mills vetoed the effort.

While the backlash doesn’t have Wall Street worried about the tech giants behind the AI boom, it may be a sign that the Silicon Valley ethos of “move fast and break things” that has defined the data-center buildout to date may no longer be tenable. James Maloney, founder and managing partner of Tiger Hill Partners, which advises investment firms, said data center developers need to engage early and proactively at the local, state and federal level.

“Data centers are very clearly on the ballot box this election cycle,” Maloney said. “This is not lost on the investment firms.”

Threat or opportunity?

The turnabouts from traditionally pro-business politicians have left some AI supporters’ heads spinning.

“I actually think it’s disingenuous for governors and elected officials who pontificate about workforce and hiring and economic development to then go and basically throw a grenade to the center of what is the new industrial revolution that literally powers almost every single business on earth,” said Caleb Max, president and CEO of the National Artificial Intelligence Association.

But even the national party organizations are recognizing data centers as a salient issue in the midterms, or possibly beyond.

One striking example was a memo last week in which the Senate Republicans’ campaign arm warned that the data center backlash is hurting GOP Sen. Jon Husted in his Ohio reelection bid. It pointed the blame at tech companies, saying they have failed to get ahead of the “toxic brand” that’s taken hold of these AI factories.

The industry, which has long relied on tech’s image as a catalyst for the economy to build political support with leaders of both parties, has struggled to come up with an effective messaging strategy that resonates with the communities they want to build in. Their slow reaction was punished last November when Democrats Abigail Spanberger of Virginia and Mikie Sherrill of New Jersey both won governor’s races in part by campaigning to force data center operators to pay for their costs up front.

But with opposition to data centers reaching a new crescendo, some in the tech industry are beginning to embrace the backlash, telling POLITICO that this newfound attention — if channeled properly — can help communities and government leaders understand the positive impacts of these data facilities.

“It highlights that politicians are hearing community concerns and that they need to respond,” said Gordon Bitko, executive vice president of public sector at ITI, a tech trade group that represents Amazon, Google and Vantage Data Centers.

Bitko noted that rather than impose a blanket moratorium, Shapiro’s new directive instead created an opportunity for tech companies and local policymakers to take a step back, do smarter planning and home in on the benefits that data centers can bring to communities, such as property tax relief.

“We, the tech industry, would be thrilled if an active part of the 2028 presidential election was about how do we build the right modern infrastructure for our economy,” Bitko said. “What are the real concerns, and what are the real benefits? And what do we need to do to address the concerns and recognize the benefits?”

But many have been reluctant to take up this mantle, an AI industry advocate said. Instead, the person said, AI labs, data center developers and electric utilities have engaged in a game of finger-pointing, with each camp shunting the responsibility for the public relations battle onto the other.

‘Somebody had to do something’

Now some of Silicon Valley’s biggest dogs are entering the fight.

Meta CEO Mark Zuckerberg is positioning himself as a positive voice on AI, even as some other tech executives warn that the technology will usher in large-scale unemployment and mass societal change.

Earlier this month, Zuckerberg laid out a positive view of AI in a 6,500-word post that previewed a $1 billion Meta fund to invest in communities that host data centers. “Thank God for Mark, because somebody had to do something,” a political operative who works on AI issues said.

But there are limitations to this approach, said Adam Kovacevich, founder and CEO of Chamber of Progress, a center-left tech industry policy coalition. “People don’t generally associate data centers with a single company,” he said, “and so I think there’s an open question about whether the data centers’ reputational challenge is a collective problem or a single-company problem.”

An executive at OpenAI, one of the country’s top AI developers, acknowledged during a POLITICO forum this month that “we have real work to do” to address public concerns about data centers.

“If you think about the amazing work we’re trying to do with AI … it’s all incredible and it’s inspiring,” Ann O’Leary, OpenAI’s vice president for global policy, said during an AI policy panel at POLITICO’s The California Agenda: Sacramento Summit. “But when you have a data center in your backyard, it’s not inspiring you.”

Benjamin Freed and Declan Harty contributed to this report.