U.S. President Donald Trump advised data center operators on Wednesday to negotiate financial agreements with local residents, arguing that paying a "dividend" would transform public hostility into support for the facilities. The president posted the directive on Truth Social, emphasizing that data centers which were previously unpopular in specific areas became "extremely popular" once a financial deal was struck.
Trump described the data center buildout as a "hot-button issue" ahead of the November midterm elections. He noted that public opposition to the environmental impact and construction of these facilities has been rising, with multiple states currently considering moratoriums on new projects. In his post, the president stated that he has watched the process "very closely" and reached a "very strong conclusion" that making deals is essential for getting the centers built.
The political pressure coincides with financial scrutiny of the sector. Data center stocks faced pressure this week as investors grow concerned about the industry's financial health. The increasing cost of artificial intelligence infrastructure is pushing companies to rely more heavily on debt markets to finance new developments.
Georges Elhedery, chief executive of HSBC, suggested a more cautious approach to investing in this infrastructure during an interview with CNBC's Dan Murphy on Tuesday. Elhedery advised being "selective" rather than taking an all-in stance, noting that investors must examine the quality of tenancy agreements and contract pricing. He warned that not all contracts demonstrate the level of quality required to support strong investment, with some proving more challenging than others.
Operational constraints remain a central point of contention. Public concern focuses on water usage, power consumption, electricity prices, and the extensive physical space required by large centers. Access to power is a significant constraint for the sector, as power grids in the United States and Europe face overwhelming applications from large energy users.
Trump, who has long supported data centers, proposed that new and large facilities be mandated to generate their own electricity. He stated that these centers should give or sell any excess power back to the local community or grid. The president claimed this approach would lead to a decrease in electric prices, suggesting there could be a substantial drop rather than an increase.