3 Reasons Why You Couldn’t Ignore Data Centers In 2025

The past 12 months represented an inflection point for the data center sector, as unprecedented investment transformed the once-niche asset class into the main engine of U.S. economic growth.

But this newfound prominence has brought intense political scrutiny and mounting fears that the artificial intelligence-driven data center gold rush may soon come to a screeching halt. 

As 2025 ends with record data center growth and the industry firmly in the public consciousness to a degree that was unimaginable just five years ago, it seems incongruous that the start of the year was marked by uncertainty and even panic about the sector’s future. 

When Chinese AI platform DeepSeek was unveiled in January, it looked to many like a paradigm-shifting technology set to stop the data center building boom in its tracks. The model's low price tag and development on fewer chips cast doubt on a fundamental assumption underpinning demand for data center capacity: that massive amounts of energy-intensive chips are needed to develop more advanced AI products. 

DeepSeek set off alarm bells across the data center sector and roiled public markets, triggering a Wall Street sell-off of data center, tech and energy stocks. For weeks, any news of scrapped data center build-outs or canceled leases was regarded as a potential sign that data center demand was about to collapse.

But these fears never came to fruition, and the following months saw demand accelerate in a way few expected. 

“We got all shook up at the start of the year — it felt like the floor had dropped from underneath the sector,” said David Guarino, managing director of data centers and towers at Green Street Advisors. “The year started off on the rockiest ground it's been on in a while, and then we just kind of shoved that aside and chugged forward. It feels like an afterthought at this point.”

Now, DeepSeek fears have been replaced by an increasingly ubiquitous narrative of an AI bubble and its impending collapse. DeepSeek may have been a false alarm, but it served as a reminder of the tremendous uncertainty that exists in this still-nascent industry and the potential of unforeseen developments that could rewrite widely held assumptions about the industry’s future. 

Here are the major trends and changes that defined the data center sector in 2025:

Data Centers Became The Backbone Of The U.S. Economy

Overall data center construction spending doubled between 2024 and 2025, an unprecedented acceleration that made data centers the fastest-growing sector in commercial real estate. 

Driven by a flood of investment from tech giants like Amazon, Microsoft, Google and Meta amid an AI arms race, data center spending has steadily increased over the last 12 months. In their most recent earnings reports, tech giants outlined plans to press the gas pedal even harder in the final weeks of 2025, deploying tens of billions of dollars more than they predicted earlier this year to bring their combined spending to nearly $400B. 

“The U.S. data center market has shifted from steady expansion to a full-scale infrastructure surge,” Moca Systems economist Brandon Michalski wrote in a report last month. “Driven by AI workloads, hyperscale cloud growth, and a race to secure power and real estate, it now represents the fastest-growing segment of nonresidential construction.”

Beyond just the skyward trajectory of the industry’s growth curve, 2025 also marked an inflection point for data centers becoming a central focus within the broader economic and financial landscape.

Just three years after the launch of ChatGPT, the AI infrastructure build-out is unique in how quickly data centers have become the lynchpin of the U.S. economy. Economists say GDP growth in the first half of 2025 was almost entirely driven by investment in data centers and computing gear, and more than 75% of stock market appreciation since the end of 2022 has come from the AI-focused companies behind that spending.

But 2025 may ultimately be remembered within the data center sector as a brief golden era for the industry’s growth.

New signs point to a potential expiration date for the blistering growth of the AI data center construction boom. At least three reports have projected the industry's growth curve will reach a plateau in the near future, and tech leaders have signaled an impending moderation in construction spending. 

Microsoft Chief Financial Officer Amy Hood last month said the firm will shift its AI capex away from building new data centers and toward buying the chips and other IT gear housed inside them. Meta CEO Mark Zuckerberg also hinted at an imminent downshift in data center spending, characterizing his firm’s AI infrastructure strategy as a bid to "aggressively front-load building capacity.” 

AI Bubble Fears Went Mainstream

As data centers have captured an increasingly prominent place in the global economy, the past year has seen a growing chorus of investors, economists and industry observers raising red flags about the tsunami of data center investment and the feverish stock market growth it has spurred.

With data showing AI isn't yet anywhere near delivering returns on investment for the tech giants or their corporate customers, skeptics say AI hype will inevitably collide with market realities to create the “mother of all financial bubbles,” the collapse of which would have a substantial economic blast radius.  

Economist Servaas Storm articulated these bubble concerns, writing this month that current U.S. growth is based disproportionately on “the hope, optimism, belief or hype that the massive investments in AI will pay off — in terms of higher productivity, perhaps lower prices, more innovation.”

“It should tell everyday Americans that the economy is not in good shape and that the AI industry and government are betting the farm — and more — on a very risky and unproven strategy involving the scaling of AI,” Storm wrote.

While AI bubble fears first emerged prior to 2025, over the past 12 months these concerns have gone from a fringe issue to the epicenter of conversations about the state of the U.S. economy.

A handful of prominent investors — including Michael Burry of The Big Short fame — have emerged as high-profile harbingers of imminent data center doom. At the same time, even devoted AI boosters like OpenAI CEO Sam Altman and Zuckerberg have acknowledged that the data center and tech industries might face the same bubble dynamics that have historically occurred in every technology-driven capex boom from railroads to radio towers. 

“There’s definitely a possibility … based on past large infrastructure build-outs and how they led to bubbles, that something like that could happen here,” Zuckerberg said in October. 

The near consensus across the data center industry, however, is that the foundations of the data center building boom remain solid and that such a bubble doesn't exist — at least not yet. 

Far from a risk of overbuilding, data center inventory lags behind demand with nearly all new projects preleased to credit-grade tech giants. Experts argue this build-to-suit dynamic minimizes financial risk: Even a major Wall Street AI correction or Big Tech capex slowdown wouldn't cause a Dot-Com-bust-level financial crisis.

Still, more risk is being injected into the data center landscape as the year draws to a close, increasing the potential blast radius in the event of an AI downturn. 

A greater share of demand is coming from firms that have a far less certain future — and a far shorter track record — than cloud giants like Amazon, Google, Microsoft and Meta. This includes a range of companies from Oracle and OpenAI to AI-specific neoclouds like CoreWeave that have seen substantial growth over the past year.

And while hyperscalers once funded their data center build-outs off their balance sheets, these companies are now taking on tens of billions of dollars in debt to finance these projects. 

Politicians Set Their Sights On Data Centers

From town halls to state houses to the U.S. Capitol, data centers have become a political target at every level of government this year. 

Before 2025, the growing political risk for the sector was largely at the local level, with a wave of organized community opposition jeopardizing individual data center projects across the country. While this wave of local pushback has continued to gain momentum nationwide, 2025 has been marked by the emergence of data centers as a key political and policy issue at the state and federal levels.

Data center developers and industry groups are scrambling to respond to a sudden surge in policy proposals targeting the industry in a growing number of states. As data center development rapidly spreads beyond the handful of traditional core markets, the past year has seen a dramatic increase in the volume of legislation and other initiatives from state governments focused explicitly on data centers — many that could have significant consequences for the industry’s growth.

A number of states have enacted or are considering bills or regulatory actions pertaining to the industry’s skyrocketing energy consumption and its impact on power grids. Lawmakers are increasingly concerned that data centers’ seemingly insatiable appetite for power could lead to grid instability and escalating electricity prices for consumers. 

Virginia, California, Texas, Utah, Georgia and Ohio have pursued measures to make data center firms cover a larger share of the billions of dollars needed for grid infrastructure upgrades to support them, preventing those costs from being passed to other customers. Beyond power issues, other state-level bills typically focus on reducing environmental impacts or defining how much control local municipalities have over what is built in their backyard.

Data centers’ growing role as a political flashpoint was highlighted last month as policy governing the industry's growth emerged in the gubernatorial races in Virginia and New Jersey.

“The local community stuff has been brewing for a while, but it seems like all the state legislation popped up at lightning speed,” said Adam Waitkunas, president of Milldam Public Relations, a longtime data center PR firm. 

Data centers have also become a focus of federal policy, not least because the industry has claimed a prominent place on the Trump administration’s agenda.

In the first 36 hours of his second term, President Donald Trump announced a $500B data center development partnership and signed an executive order that could expedite the development of data centers powered by fossil fuels. Trump has subsequently signed executive orders framed as efforts to expedite the development of data centers and the energy infrastructure to power them. This includes efforts underway to build data centers on federal land. 

On the left side of the aisle, lawmakers have been increasingly critical of the data center sector.

Democratic legislators, along with left-leaning interest groups across a range of issues from the Sierra Club to the NAACP, are increasingly targeting data center development as a priority issue to engage voters.

Earlier this month, a trio of Democratic senators launched an investigation into the impact of data centers on consumers’ electricity bills, while Vermont Sen. Bernie Sanders called for a moratorium on data center development. 

Data centers’ increased public prominence poses problems for a sector that has gone from being obscure to being unpopular, with polls showing cratering public opinion of data centers. Developers and industry groups are struggling with how to respond to this emerging national political narrative that frames them as the villain, an issue that may worsen as the 2026 midterm elections approach.