Data Centers Prop Up Construction Industry Amid Economic Turmoil
Despite depressed construction spending and economic headwinds, the nation’s largest contractors' construction backlogs are nearly two months longer than they were a year ago — and much of the reason is the explosive growth of new data centers.
The nation's construction backlog was 8.7 months in June, the same level as in April, Associated Builders and Contractors said in a release. While high interest rates, tight lending standards and uncertainty regarding tariffs and immigration policy are creating challenges for the industry, contractors are being buoyed by ongoing data center construction.
“The durability of contractor backlog is partially due to the ongoing boom in data center construction,” ABC Chief Economist Anirban Basu said in the release. “One in 7 ABC members is currently under contract to perform work on a data center.”
The push to build more data centers to facilitate artificial intelligence growth is supported by a $500B data center development partnership with the Trump administration. Major data center plans include Stargate, the joint venture of OpenAI, SoftBank and Oracle, which is building a 206-megawatt data center development in Abilene, Texas.
Meta, the parent company of Facebook, Instagram and WhatsApp, this week announced plans to build several multiple-gigawatt data center clusters in addition to the two AI megacampuses it already has in development. The first of the new campuses slated to come online is Prometheus, a data center cluster that is under construction in Ohio and scheduled to start up next year.
But data centers face challenges with power availability, which could be exacerbated by the One Big Beautiful Bill’s phase-out of clean energy tax credits.
ABC’s June construction backlog survey predates the most recent trade policy announcements, which include plans for a 50% tariff on copper imports, a necessary material for data centers, electrical wiring and plumbing.
One in five contractors had a project interrupted or paused due to tariffs in June, ABC reported. Meanwhile, profit margin expectations may face pressure in upcoming months due to import taxes putting upward pressure on construction input prices, Basu said.
The largest share of contractors, 42%, expected no change in their profit margin in June, according to the survey. About 31% of respondents expected profit margins to slightly increase, and about 21% expected profit margins to slightly decrease.
Nonresidential construction spending decreased 0.2% in May, the fourth straight month of decline, ABC reported, citing Census Bureau data. Private sector nonresidential spending remained “particularly weak” and was down 7% from its January 2023 peak.
