Political opposition to data centers could crimp a major driver of recent U.S. economic growth, Wall Street analysts warned, as Democrats' midterm election victories are expected to slow and increase the cost of AI-related construction across the country. Federal Reserve researchers estimated that spending on data centers, power facilities and other AI-related technology equipment accounted for roughly 20% of U.S. gross domestic product over the preceding year. Spending by major technology companies such as Alphabet, Amazon, Meta and Microsoft is set to double to around $800 billion in 2026 and is expected to reach $1 trillion in 2027, according to Capital Economics.
Although political opposition to data centers ranges from support for construction moratoriums to more moderate proposals, economists now expect the election results to constrain investment growth. The immediate impact may be limited, as investment in data centers is likely to continue for projects already underway and those with permits. However, the longer-term challenge for AI companies lies in sustaining capital expenditure at the current pace while the expected productivity gains and profits from AI remain largely unrealized. Capital Economics chief North America economist Stephen Brown told CBS News that the calculations justifying current spending levels depend on major AI companies reaching $2 trillion in revenue by the early 2030s, which he described as very unlikely. "Our view is that because of that, there is likely to be some slowdown in data center construction. We are not saying it will stop altogether, but the level of investment is likely to ease. And that would have some detrimental effects on the U.S. economy," Brown said.
The economic consequences could be substantial if investment slows. In 2025, investment in AI added roughly 0.3 percentage points to real GDP growth, according to Capital Economics, which expects the sector to contribute similarly this year. If AI investment were to fall in 2028, Capital Economics chief economic advisor Vicky Redwood estimated that a 10% annual drop in spending from current levels would reduce GDP growth by around 0.1%. Economist Allison Schrager with the Manhattan Institute told CBS News that slower AI development carries risks: "Our economy is leveraged on this idea that AI will make us rich. There are risks to making it slower, it will mean slower growth."
A significant portion of recent economic growth has come from the wealth effect generated by rising stock prices among higher-income investors who hold AI-related equities. With the S&P 500 up almost 100% over the past three years, these gains have driven increased consumer spending. Capital Economics' Brown estimated that this wealth effect is boosting growth this year by roughly 0.5%. If data center construction slows and equity markets weaken accordingly, the consequences could be severe. A 20% decline in the S&P 500 would turn the current 0.5% growth boost into a 0.5% drag on GDP, representing a 1% hit overall. "We would be talking about a sharp slowdown in GDP growth versus a recession," Brown said. Moody's Analytics chief economist Mark Zandi cautioned that while investors may sustain AI funding for the next couple of years, long-term prospects remain uncertain, warning that rising costs could force AI companies to raise prices, potentially dampening further investment.