The US Midterms: A Silicon Valley nightmare?

US voters turn against the AI data center boom

The AI build-out has met its political limit. Data centers were pushed through rural America with little local consent, and the US midterms turned that into an election issue. Democrats took both houses of Congress. In Texas, where the industry hoped to concentrate, voters elected a governor who wants a moratorium, and more than 30 local measures to block development passed. The industry now faces a constraint that money alone cannot clear, because voters decide whether the compute gets built.

Takeaways

• AI sat at the centre of midterm races. Democrats took both the House and the Senate, and Danny Fortson calls it the biggest change election in roughly 50 years of US midterms. At the 2022 midterms ChatGPT had not been released, and AI was not discussed at all.
• Voters approved limits on data centers nearly everywhere. More than 40 ballot propositions or measures on data centers went before voters, and at least 30 were approved to ban or severely limit development. Opposition drew Republican and Democratic voters alike.
• Texas flipped and a moratorium is coming. Republicans were swept out of office in Texas, which had been on track to become the data center capital of the world. The new Democratic governor, Gina Hinojosa, wants a ban or moratorium and an end to tax breaks for new data centers.
• Compute access is the industry's biggest risk. In Anthropic's 95-page S-1 filing ahead of its IPO, the largest risk factor was access to compute, meaning data centers. Almost $900bn of spending is planned, and analyst Dan Ives estimates 10% of data centers will not now happen.
• Musk's record political spending failed. Elon Musk gave almost $500m to the Republican campaign, about $250m of it in Texas, including $224m backing Ken Paxton. Paxton was trounced by James Talarico, and Musk joked on X that his election-interfering space lasers did not work.
• The industry never brought residents along. Fortson says the build-out was reckless and careless, done as fast as possible with questions asked later. The anger mixes resentment of the tech billionaires photographed behind Trump at his inauguration with local worries about water and power costs.

How a data center arrives in a Texas town

1. Land is bought by a corporate shell two or three levels removed from the company actually behind the project, not by Google or Meta directly.
2. Parcels of 300 acres of farmland are snapped up at a time.
3. Public hearings follow, then a giant industrial warehouse appears next to people who moved to the countryside for the quiet.
4. Red Oak, a bedroom community of 20,000 outside Dallas, is encircled by seven data centers that are operating or under construction.