The rapid expansion of artificial intelligence across the United States has fueled unprecedented demand for data centers. But despite the surge in AI investment, new construction slowed in 2025, highlighting growing challenges tied to electricity supply, local opposition, and regulatory hurdles.
Data Center Construction Declines for First Time Since 2020
Construction of new U.S. data centers declined for the first time in five years, according to a February 2026 report by commercial real estate firm CBRE Group Inc.
Data center capacity under construction fell to 5.99 gigawatts at the end of 2025, down from 6.35 gigawatts a year earlier. The drop comes even as demand for AI computing infrastructure continues to surge, driven by cloud providers, tech giants, and enterprises racing to deploy generative AI systems.
The slowdown reflects mounting delays in permitting, zoning approvals, and securing access to electricity—critical requirements for facilities that consume vast amounts of power.
At the same time, vacancy rates in major data center markets fell to a record low of 1.4% at the end of 2025, underscoring the imbalance between supply and demand.
Development Shifts Beyond Traditional Tech Hubs
Historically, Northern Virginia—often referred to as “Data Center Alley”—has been the nation’s dominant hub. But rising constraints are pushing developers to consider new regions.
According to CBRE, construction activity dropped sharply in several established markets in 2025:
- Northern Virginia: down 29%
- Hillsboro, Oregon: down 15%
- Silicon Valley, California: down 14%
In contrast, emerging and secondary markets saw significant growth:
- Chicago: construction surged 169%
- Dallas-Fort Worth: up 15%
- Atlanta: more than 2 gigawatts under construction, surpassing Northern Virginia’s 1.9 gigawatts in the second half of 2025
Faster long-distance fiber networks and the availability of land and power are making these alternative locations more attractive.
“Combined with growing interest in markets that offer available land and power, this is spurring investment beyond traditional hubs and reshaping the North American data center market,” said Gordon Dolven, CBRE’s director of data center research.
Power Supply and Environmental Concerns Trigger Local Pushback
As data centers multiply, resistance from local communities and policymakers is intensifying.
Residents and officials are increasingly concerned about:
- Rising electricity costs
- Heavy water usage for cooling
- Environmental impacts
- Strain on local infrastructure
In Illinois, Governor JB Pritzker recently proposed temporarily pausing state tax incentives for data center projects amid concerns about escalating power prices for residents.
In New Mexico, an Oracle-backed data center project that received tax incentives and public financing has drawn protests focused on environmental risks.
Meanwhile, in Northern Virginia, where data centers have transformed entire communities, some residents have begun to oppose further expansion, citing noise, energy consumption, and quality-of-life concerns.
AI Investment Continues to Accelerate Despite Construction Slowdown
Even with construction delays, the broader outlook for data center investment remains strong.
Analysts at Morgan Stanley and Moody’s estimate that more than $3 trillion could be invested globally in data centers and related energy infrastructure to support AI growth in the coming years.
In 2025 alone, new tenants absorbed a record 2.5 gigawatts of data center capacity—an increase of 38% compared with 2024, CBRE reported.
This surge reflects growing adoption of AI tools across industries ranging from finance and health care to manufacturing and retail.
Major technology companies—including cloud providers and AI developers—are aggressively securing capacity to support machine learning workloads, which require significantly more computing power than traditional applications.
Infrastructure Bottlenecks Could Reshape America’s Digital Economy
The slowdown in construction highlights a critical bottleneck in America’s AI expansion: physical infrastructure.
Unlike software, data centers require:
- Massive amounts of electricity
- Suitable land
- Regulatory approvals
- Long construction timelines
In some regions, utility providers are struggling to deliver sufficient power quickly enough to meet demand.
As a result, developers are scouting new locations in states with surplus energy capacity, lower costs, and more supportive regulatory environments.
Conclusion
The United States remains at the center of the global AI boom, but the pace of data center construction is no longer keeping up with demand. Power shortages, regulatory delays, and community resistance are slowing expansion, even as tech companies invest billions to build the digital backbone of the AI era. The shift toward new markets signals a broader transformation that could reshape where—and how—the nation’s most critical technology infrastructure is built.
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