Behind the Curtain: The new existential threat to AI

The most pressing danger to AI and its economic growth lies in growing public opposition to U.S. data centers, according to Republicans and AI CEOs. The issue is so urgent that they are scrambling to find a compelling message to shift public opinion quickly enough. The nightmare scenario is a political and economic chain reaction that could cripple the AI revolution, triggered by voter backlash over data centers' higher electricity bills, water usage, large warehouse-like structures, and job displacement fears.

As politicians face criticism and the public turns against data centers, both parties are racing to capitalize on the situation. Democrats are imposing stricter restrictions or blocking projects, while Republicans retreat from an industry they once championed. The pipeline of new data centers slows, curbing the computing power needed for AI companies to improve their models and products.

This, in turn, raises concerns among investors about the staggering spending, borrowing, and valuations built on expectations of continuous AI growth.

The AI boom has become inextricably linked with the U.S. economy, with Goldman Sachs estimating that U.S. AI investment will reach $600 billion this year, equal to approximately 2% of GDP and 10% of business fixed investment. Major technology companies have committed trillions of dollars to future spending, with much of it tied to AI infrastructure. Even established companies are turning to debt markets to finance their AI buildouts.

The politics of data centers are becoming increasingly toxic, particularly in several gubernatorial races this fall. Pennsylvania Governor Josh Shapiro, a potential 2028 presidential candidate, shifted from supporting data centers as an economic development boon to criticizing them after his Republican opponent campaigned against data-center development.

Shapiro imposed new requirements for data-center developers, focusing on energy affordability, community engagement, workforce development, transparency, and environmental protection.

In Wisconsin, Republican gubernatorial nominee Tom Tiffany is running ads attacking his Democratic opponent for suggesting the state could become an AI data hub for the entire globe. This marks a significant shift in Trump's pro-AI coalition, as Republicans in swing states struggle to align themselves with the new populist wave upending the midterms.

OpenAI is actively courting state and local officials to promote the economic benefits of data centers, emphasizing the need to address local concerns, such as electricity and water usage. Meta recently announced a $1 billion Future Is for Everyone Fund to benefit teachers, law enforcement, and fire departments in communities hosting data centers, while also highlighting the direct economic benefits, such as job creation and increased tax revenue.

Public opinion on AI is shifting, with 52% of Americans expressing more concern than excitement about AI's increased presence in daily life, up from 37% in 2021. Even younger adults, who were once more enthusiastic about AI, have grown more skeptical, with 55% now expressing more concern than excitement due to fears of job losses. The erosion of AI optimism is particularly pronounced among those under 30.