THE DATA CENTER DILEMMA

My thoughts on data centers coming to the region are complicated.  If I am wearing my stock market hat, where I am invested in corporations on the cutting edge of artificial intelligence, my thoughts are positive. On the other hand, if I consider the possibility of a large data center operating a short distance from home, my thoughts are “build them in Texas.”

This creates the contradictory opinion of “create as many data centers as you need, but not in my backyard.”

The Investor’s (Macro) Case.  Artificial Intelligence (AI) is now a major factor in the resurgence of the United States economy. AI cannot realize its full potential without massive data centers. Yahoo Finance estimates that in 2026, AI-related investments, supported by data centers, account for roughly 30%-40% of US GDP growth. These entities comprise about one-third of total stock market value.  

 

While there are different types of data centers, they are basically facilities built to house and distribute huge amounts of data collected from numerous sources. The centers contain networking infrastructure, cooling systems, and server racks.

 

To illustrate the relationship between AI and data centers, consider a pizza shop. AI chips, manufactured by companies like Nvidia, are the raw pizza dough. The chips are specialized circuits designed to speed up machine learning. Data centers are the pizza ovens. Without them, the newest chips cannot be processed into immense datasets – used to create the next generation of AI.

In recent years, the race to build data centers has accelerated. According to ABI Research, there will be 8,821 in operation worldwide in 2026. This number is expected to reach 12,048 by 2035.

Amazon Web Services (AWS), Microsoft Azure, Meta, and Google are the largest owners of U.S. data centers. These companies often build massive, hyperscale facilities for their own AI projects. Meta’s Hyperion center in Louisiana has a larger footprint than Manhattan.

AWS has the most data center sites worldwide among all cloud hyper-scalers, with 105 in the United States. This translates into 2.3 gigawatts of energy usage (enough to power 2 million homes simultaneously). By 2035, Deloitte Research estimates that the power demand from AI data centers in the United States could grow more than thirtyfold, reaching 123 gigawatts. 

 

As an investor, I want to financially benefit from the transformative economic benefits of AI technology made possible through data centers. Sustained gains in labor productivity and capital efficiency could add trillions to the world economy.

 

The Local (Micro) Case. The paradox is that no investor in AI technology would be pleased to wake up in the morning to see a data center being constructed across the street. While AI technology may add value to a portfolio, homeowners are very concerned about quality of life and property values. Many have decided that the negative factors that a data center brings to their community far outweigh the benefits.

At least 50 new data centers are being considered for Pennsylvania. Southwestern Pennsylvania is the focus of many would-be developers. Our region has numerous industrial sites with access to natural gas for power and rivers to supply water. Many of the brightest AI scientists work at local universities.

These proposed projects are facing strong opposition from a connected network of community groups. It appears that public outcry will outpace objections to past extractive industries like coal and natural gas.

The grievances are backed by solid science and include negative reports from established data centers. Massive energy consumption leads to higher energy costs, high water usage causes damage to water tables, and noise/light pollution degrades quality of life. Moreover, like many new technologies, the long -term environmental effects of data centers are unknown.

In my own neighborhood of South Strabane, the potential for building a data center on 1,400 acres of land owned by CNX Resources has created a firestorm. There is no formal agreement, and the only activity is the drafting of a local ordinance to address data centers. Nevertheless, concerned residents attend every township meeting in droves.

I have been monitoring these meetings on Zoom. The residents who speak are well-informed and persuasive. They propose revisions and restrictions to the ordinance that would make it difficult for the developer to proceed.

South Strabane’s public negativity is not encouraging for a data center. A traditional warehouse or other less intrusive development for the 1,400-acre property makes more sense.

New data centers are going to get built. However, the desirability of new centers will continue to be debated in communities across the region.