Gavin Newsom’s Data Center Gamble

Likely Democratic presidential contenders are bashing the buildout of data centers in the run-up to 2028. With one big exception: Gavin Newsom.

The governor of California — home to the third-most operating data centers of any state — has shot down legislation to require the facilities to disclose water use, and rather than join calls from progressives to block their construction, he has touted the state’s potential to support “critically important digital infrastructure.” It’s a posture that reflects Newsom’s deep ties with Silicon Valley and carefully cultivated pro-innovation brand.

Many in the tech industry, which has often found an ally in Newsom, say his position is helping the state stay ahead in the artificial intelligence race sweeping the globe.

“The response to concerns can’t be indefinite delay or outright obstruction” of data centers, Ahmad Thomas, CEO of the Silicon Valley Leadership Group, told POLITICO. “We've been fortunate to have a governor who I believe truly understands our competitive position as the global leader in technology.”

As other Democratic governors seize on data centers in a national fight over the AI boom, Newsom is mostly resisting joining them, opening one of the first significant policy rifts in the 2028 primary field.

But staying out of the data center brawl exposes the governor to a growing liability as public opposition to data centers finds political outlets both nationally and in his home state. This month, the Southern California city of Monterey Park overwhelmingly voted to ban the facilities due to concerns about pollution and electricity costs, and shortly after that, Seattle became the largest U.S. city to pass a data center moratorium. With polling showing that the majority of Americans oppose the construction of AI data centers in their local area, environmental activists in Newsom’s state are growing impatient.

“I feel like the [Newsom] administration and leadership in general has been reluctant to take data centers head on,” Jose Torres, executive director of the Affordable Energy Campaign group representing a coalition of environmental organizations, said in an interview. “We do hope that the governor and leadership across California steps into more of a leadership role to prevent data center growth from having a negative impact on ratepayers.”

Newsom’s potential 2028 rivals are not holding back. Illinois Gov. JB Pritzker this month moved to suspend data center tax incentives after lawmakers in his state failed to do so. Pennsylvania Gov. Josh Shapiro created a signature program setting standards for data center development. And Maryland Gov. Wes Moore has vocally expressed his conviction that the data center industry shouldn’t be allowed to determine its own rules.

Their policies reflect a broader shift among Democratic governors, who not long ago were eagerly rolling out the welcome mat for data center projects. As concerns over rising utility bills mount and larger localities sign off on pauses, much of the party is coalescing around a middle-ground alternative to the moratoriums sought by progressives and some communities. They want the data center industry to foot the bill for the electricity demands it’s creating.

But for 2028 hopefuls, opposition to the facilities could antagonize deep-pocketed tech donors, many of whom Newsom has longstanding relationships with, or invite charges that they are hostile to innovation. The AI industry is quickly becoming one of the biggest political spenders, and leading companies are staking hundreds of billions of dollars on their infrastructure building blitz.

Indeed, Newsom has rarely focused on the physical infrastructure buildout enabling AI’s economic impacts — except to call the debate misdirected. He says there are bigger things to worry about when it comes to the technology — namely, its potential to completely upend the job market and decimate white-collar jobs, a prospect that was the focus of a recent executive order from the governor.

“The tech genie is not going to go back into the bottle; just saying that you should not or cannot build a data center is not going to slow this technology down,” Newsom said at the Center for American Progress conference last month.

As governor, Newsom has relied on the booming tech sector to fill state coffers with tax revenue. Still, he’s repeatedly emphasized, including in extended conversations on his podcast last month, his belief that AI will have profound impacts on American society and that the government must lead in setting up guardrails for the technology.

“The whole system has to be reimagined and … I don’t think we’re having those accelerated or advanced conversations right now,” Newsom said at the CAP event, referring to his position that the state must ensure that the tax system doesn’t favor automation. “We’re still discussing who’s going to pay for my increased electricity because of the data center, which is a legit issue, but it’s not the issue.”

Turning the spotlight away from data centers may be both a policy and political preference for Newsom. He’s “trying to paint himself and position himself within the Democratic Party as pro-innovation, pro-technology,” said Dave Vorland, a former Biden official who leads a project at the tech-backed Chamber of Progress to reset the relationship between Democrats and the sector.

“I'm not at all surprised that he hasn't rolled out kind of a signature AI or data center policy, because I think that's just not top of mind for his voters,” Vorland said, pointing to polling that indicates AI still ranks below most issues, even as it’s climbed in importance more than any issue over the past year amid the vocal backlash.

The governor has clashed with the tech sector on some policy fronts, including a software sales tax expansion that could be part of a final budget agreement this year. Silicon Valley companies are making a last-ditch effort to derail the tax, which would hit everyday products like Slack and Google Workspace.

But in many ways, he’s had the luxury of staying out of the data center issue. While data centers have driven major electricity price increases in the eastern U.S., wildfires have dominated California’s cost concerns. With tough permitting rules in the Golden State, the data center buildout is also happening far faster in other places.

California’s planned and under-construction data centers may grow the state’s stock by 24 percent, according to a POLITICO analysis of data byData Center Map, one of the most comprehensive trackers of the industry. That figure is much higher — 121 percent, 132 percent and 144 percent — in Pennsylvania, Maryland and Illinois, respectively.

California’s comparatively moderate growth has given the state’s regulators space to quietly prepare the electricity system for the coming demand spike, according to the governor’s office.

“California has planning frameworks and regulatory safeguards in place to protect Californians, and we can’t speak to what other states are lacking,” Newsom spokesperson Anthony Martinez said in a statement. “Governor Newsom is committed to making sure that no single industry unfairly burdens customers or drives up utility bills.”

But that window for the wonks to work in peace may be closing as grassroots opposition builds in California. More than two dozen California groups joined a national Stop Data Centers Coalition that launched last week. And over two-thirds of California voters oppose new data centers in their community, according to a May survey conducted by FM3 Research and funded by climate advocacy group Net-Zero California.

The mayor of Monterey Park, the Southern California city that just became the first to vote to permanently ban data centers, predicted that the lack of a strong top-down message on data centers will spur more communities to act.

“If we have some of the legislation at the state level, us individual cities are not going to need to be worrying about moratoriums or ballot measures or whatnot,” Mayor Elizabeth Yang said. “In the meantime, absent state action, this is what we have to resort to.”

Unlike other states, California legislators haven’t introduced a bill to outright halt data center development. Instead, they’ve pursued data center legislation focused on energy and water consumption concerns.

After vetoing the water use disclosure legislation last year, Newsom said California should be “well positioned to support the development of this critically important digital infrastructure.” He signed the other data center bill that reached his desk last year, directing a state regulator to study whether data center expansion would shift costs onto ratepayers, even though earlier drafts would have imposed actual changes to how data centers pay for their electricity.

Newsom could be forced to confront the issue again soon. This year, a slew of bills that would regulate the electricity rates that data centers pay are making their way through the Legislature.

But for now, Newsom’s avoidance of the data center minefield may be prudent, said Matt Rodriguez, a Democratic strategist.

“Gavin’s doing well by not talking about substance so far,” said Rodriguez, who’s worked on three presidential campaigns.

“At some point, he and his campaign are going to need to pivot from just a bunch of snarky tweets … to actually running a campaign,” Rodriguez said. “My sense is that he’s keeping his powder dry for as long as he can, simply because the politics are going well.”

Catherine Allen contributed to this report.