The great data center backlash threatens to disrupt the future – can businesses get around it, or is this a long-overdue reckoning?

Proposed capital expenditure from big tech companies into AI infrastructure has been astronomical. The likes of Meta, Google, and Microsoft, among other hyperscalers, are leading the charge on emptying their coffers to spend on data centers not just in the United States, but across the world. Among the beneficiaries of this spending are neoclouds, gobbling this cash up as part of their ongoing infrastructure buildout, alongside borrowing and share issuances.

But all this infrastructure spending is not simply numbers on a screen or figures to trawl through on an Excel spreadsheet. It's required spending, experts say, for the AI industry to sufficiently build the systems we need in the future – whether that might be smarter models, agentic clusters or simply to provide more capacity as more and more users start plugging into a new wave of AI-enabled productivity tools. And, at the other end of the dollars spent, are people who live in areas affected massively by the presence of these ever-humming, environmentally-questionable monuments of silicon and steel.

That's why, in many parts of the US and elsewhere, severe public backlash has spilled into regulatory action – which ranges from more consultation with local communities to a moratorium on construction. Is there anything that businesses can do to move past this movement?

Explaining the big AI backlash

Amid a proposed piece of federal legislation that seeks a national moratorium on building or upgrading AI data centers until safety is mandated by law, government at the state level has issued several banning orders against new data center construction. This includes New York State, Texas, Maryland, and Pennsylvania, among others. So where does this growing sentiment against AI come from, realistically? Much of it has to do with the impact on power and the environment.

"There is a trend right now of going from local bans and moratoriums to statewide ones," explains Arif Gasilov, partner at energy and environmental consultancy Gasilov Group. "New York enacted the first statewide moratorium in July, and in just one week in September, the governors of New Hampshire, Connecticut, and Oregon all announced pauses or refusals.

"In addition, moratoriums that are countywide still copy each other; more than half of Maryland's 24 counties now have one. In addition, the costs of data centers in local counties, such as electricity bill increases and whatnot, show up for everyone, while tax revenue shows up only to the local government and jobs only to the local skilled electricians, and so on. Overall, as such, the overall negative sentiment gets spread across more people."

This is a sentiment that Nicholas Nadeau, co-founder and CTO of Onix, echoes, telling ITPro that "most of the concerns are real".

"Underneath the noise and water complaints is an ownership question. People already paid for this industry in three currencies: their work that became training data, their wages that never moved with the productivity gains, and their savings that index funds route in at valuations insiders set. Data centers add a fourth, and it is the visible one: their grid, their water, their land."

The rising cost of electricity is the biggest factor that's impacting public mood, as well as the impact on water usage in arid areas – with evaporative cooling using the same supply that residents are under restrictions for. For example, a Meta facility in Newton County, Georgia, uses 10% of the entire county's supply. When you live nearby, there's a need to rely on diesel-based backup generators, traffic due to the construction, and a reduction in the local housing supply too, among other knock-on effects.

Dan Ye, CEO of CollegeNode and UC Merced lecturer (and former Johns Hopkins University lecturer) in AI, blames some, but not all, tech companies. "A handful of bad actors have done real damage here – xAI's Colossus data center in Memphis, Tennessee, is the most cited example, generating significant noise and discharge complaints – and the media coverage that follows fuels fear among residents elsewhere who are simply weighing whether to welcome a data center into their neighborhood."

He adds that a data center done right has "minimal impact" on neighbors. "These are engineering and siting choices, not inherent features of the technology – which is why it's worth being careful not to throw the baby out with the bathwater," he explains. "Data centers are also a significant source of local revenue."

What does this movement mean for AI progress?

Frontier training could slow down significantly if there is a sustained shortage of computing capacity, Ye says, while limiting how AI services are deployed and keeping usage costs higher than they'd be with more available infrastructure. But temporary pauses may not make much of a difference at all in Nadeau's eyes.

"Arvind Narayanan ran the arithmetic on Hard Fork podcast last month and found a one-year state moratorium delays AI progress by hours, not months, because efficiency at a given capability level improves several times a year while new capacity adds roughly a quarter more, and blocked sites get rebuilt elsewhere anyway," he says.

There's also a distinction to make between calls for a slowdown in the infrastructure and calls for a slowdown on the safety and security front. This is something that Ye characterizes as two pressures pulling in different directions. If political pressure persists, he says, tech companies will push data centers offshore to places like Canada, given its abundant hydro power, or even China, which is enduring a renewables boom presently.

The pausing for safety rhetoric, meanwhile, is just cover, according to Gasilov, "because it made them look responsible while the real delay, as per the data, is grid queues". Indeed, there's a massive backlog when it comes to the power generation and infrastructure, with many sites not expected to go live until 2027 or 2028. These sites will largely build their own behind-the-meter gas generation plants to power them, sidestepping both grid connection delays and protests, but may result in much higher rates of air pollution and premature deaths, he warns.

Can the industry do anything to ease concerns and get back on track?

Almost half of the states in the US have approved large load tariffs, which make data centers pay their own grid costs for upgrades to the grid – and more than ten states have filed moratorium bills. Gasilov says that the opposition argument wins out at county planning meetings, but won't necessarily solve the problems with bills, for instance.

Companies in this space can do several things to ease concerns and smooth the resumption or acceleration of this massive infrastructure buildout, the experts tell ITPro. Ye persuades site developers to bake community acceptance and deliverable power into the investment case from day one and not treat this as an afterthought. As he puts it: "Evaluate sites against actual grid capacity, water availability, residential proximity, and how much development is already planned nearby. A cheap parcel can turn very expensive once you factor in years of interconnection queues and approval delays."

As for businesses that buy AI services, he says a reasonable practical response is to understand a supplier's capacity constraints and lock in a service commitment that matches up with your organization's particular needs. He advises that critical workloads should remain portable, if possible, and they should invest in smaller models that can run either on-site or even on-device rather than chucking everything into the cloud. Nadeau puts it more bluntly, saying: "Stop naively buying compute by the token." He adds that businesses should measure cost and energy per completed task, then size the model to the job, while pushing AI inference as close to the edge as possible – cutting down on latency and compute costs while also limiting privacy liability in the process.

Ultimately, however, the buck stops with the infrastructure developers and city planners. Microsoft, for example, set a very useful benchmark with its commitment in January 2026 to cover power costs and water use, Ye says, adding: "The strongest reassurance is a project residents can actually hold accountable. If the economics only work by shifting infrastructure costs or environmental burdens onto neighbors, the business model itself needs to change."