The buildout of data centers across the U.S. is accelerating quickly as artificial intelligence workloads expand. Capital spending from large technology companies continues to rise, and there is no sign of a slowdown. What is becoming clearer, though, is that the country’s power infrastructure is not keeping pace.
Most of the U.S. electrical grid was designed long before hyperscale data centers became a core part of the economy. These facilities consume enormous amounts of power and operate continuously. In some regions, demand is rising faster than utilities can realistically upgrade infrastructure.
When that happens, the costs do not disappear. They tend to show up in electricity bills.
Rising Power Costs Are Getting Political
Concerns over electricity prices have started to spill into policy discussions. Federal officials and several governors from the Northeast have asked PJM Interconnection, the largest grid operator in the country, to consider steps that could reduce recent spikes in power costs.
One proposal would require large data center operators to cover a greater share of the incremental costs they create. PJM has said it was not formally consulted in advance and has not agreed to any emergency action. Still, the request itself is notable. It suggests growing frustration with how grid costs are currently allocated.
Even without intervention, the underlying pressure remains.
Northern Virginia Still Leads, but Not Without Issues
Northern Virginia remains the largest data center market in the world, with well over 500 facilities spread across the region. The area benefits from dense fiber networks and proximity to major internet exchanges. That concentration has also created congestion, higher land costs, and mounting strain on the local grid.
Developers are increasingly looking beyond the usual hubs. New projects are moving into areas where power is more available and infrastructure is less stretched. Parts of the Midwest, Mountain West, and select regions in Pennsylvania and California are seeing increased interest.
State incentives are part of the equation. Ohio, for example, has used tax exemptions to attract large data center investments, even as energy and construction costs rise.
Big Tech Spending Has Not Slowed
The spending numbers remain large. Meta reported about $17 billion in capital expenditures for the quarter ending June 2025. Microsoft spent more than $24 billion over the same period. Amazon continues to commit billions to new data center campuses, including a major project in Northern Indiana.
Bank of America estimates that annual U.S. data center construction spending reached roughly $40 billion by mid-2025. That level of investment supports a wide range of industries, from utilities to equipment suppliers. It also increases exposure to regulatory risk.
Electricity Bills Are Already Higher
Residential electricity prices rose more than 5 percent year over year as of October, based on federal data. In regions with heavy data center concentration, the increase has been far more noticeable over the past several years.
Data centers are not the only reason power costs are rising, but they are contributing. Large facilities often require upgrades to transmission and distribution systems, especially in areas without spare capacity. Those investments are frequently passed on to customers.
There are cases where pricing pressure is lower. Data centers built in regions with excess generation or structured to avoid peak demand can reduce their impact. Still, the broader trend points toward higher costs.
An Old Grid Makes the Problem Worse
Aging infrastructure is a major factor. Much of the increase in electricity rates over the past decade has come from investment in distribution systems rather than power generation. These upgrades have become more expensive following pandemic-related supply disruptions and higher labor costs.
Adding large, constant loads to an already strained system only increases the need for further spending.
Power and Water Use Are Both Rising
The Department of Energy estimates that data centers could account for between 6.7 percent and 12 percent of total U.S. electricity use by 2028, up from just over 4 percent in 2023. Utilities are beginning to respond by introducing new pricing structures for large customers.
Some states are moving faster. Oregon passed legislation requiring data centers to pay for the full grid costs they impose. Microsoft has also stated that it is willing to pay higher electricity rates in certain regions.
Electricity is only part of the issue. Data centers require large volumes of water for cooling, and industry estimates point to significant increases by the end of the decade. Power plants supporting these facilities add further pressure, particularly in water-stressed regions.
Bottom Line for Investors
Data centers remain a long-term growth driver tied to cloud computing and artificial intelligence. That has not changed. What has changed is the visibility of the constraints around energy, water, and infrastructure.
Investors should pay close attention to how costs are allocated going forward. If utilities and regulators succeed in shifting more of the burden onto large power users, margins and project economics could be affected. If they do not, political pressure is likely to increase.
Either way, the next phase of data center expansion is likely to look more complicated than the last one.
