What impact will the growing opposition to data centers have on the market? Damo said so

What impact will the growing opposition to data centers have on the market? Damo said so.

Morgan Stanley’s latest warning is that public opposition to the craze for artificial intelligence infrastructure (data centers) will have an impact on the market. Data center construction has been part of the market driver for years, but as power- and water-hungry buildings increasingly pop up across the country, opposition from local residents has grown.

Morgan Stanley said this is becoming a bottleneck similar to energy and other resource shortages, hindering the construction of data centers. Analysts at the bank wrote in the latest report: "With the introduction of new bans, community resistance to data center construction will accelerate in 2026, and most changes will occur at the local level.

This will put pressure on costs and construction schedules, and may change the geographical distribution of data centers." Morgan Stanley's analysis report was released on Tuesday, the same day that New York state announced a one-year construction moratorium (moratorium), becoming the first state in the United States to suspend the construction of large data centers.

“As data center development threatens to drive up utility bills, deplete our natural resources, and create uncertainty for New York residents, it is my responsibility to act and lead,” said New York Governor Kathy Hochul. What impact will it have on the market?

Morgan Stanley noted: "Resistance to future data center construction will clearly have an impact on the timing and intensity of the capital expenditure cycle, either extending its duration or reducing overall investment requirements." The report also predicts that data centers are likely to see an increase in on-site power generation due to public concern over the resources required to operate them.

Morgan Stanley pointed out that stocks such as Solaris Energy Infrastructure, Innio NV and Bloom Energy will benefit from this. The report also said that data center REITs such as Digital Realty Trust should be unaffected by the backlash given their small size relative to large hyperscale data center operators.

Morgan Stanley added that public opposition could have an impact on the debt issuance needed to facilitate construction. The bank said: "On the credit side, continued data center disruptions may ultimately lengthen the cycle and reduce future supply by reducing capex and financing requirements.

But the situation of early capex releases may have worsened in the short term, exacerbating issuance pressures, especially given that the artificial intelligence ecosystem has driven almost all new enterprise supply this year." Concerns often focus on environmental impacts and the near-constant drone noise reported by residents near data centers.

Environmentalists have highlighted problems with data center construction and a lack of transparency in building data centers in rural communities where resources may not be sufficient to support their operations. Data center executives say they are concerned about the industry's poor public image.

Morgan Stanley stressed that this growing negative sentiment was concerning, citing data showing that attitudes towards the consequences of AI deployment are increasingly turning negative.

"In a recent survey, about half of respondents believed AI data centers would have a negative impact on electricity prices and the grid, with concerns about water prices and the environment not far behind at about 45 percent," the bank wrote.

"We are seeing local communities resist data center construction through legislation, construction moratoriums, and more, raising the question: Will this opposition limit the scale of AI infrastructure construction in the United States?" the report said.

“About US$156 billion worth of projects are expected to be canceled or delayed by 2025, with US$130 billion of projects affected in the first quarter of 2026 alone,” the bank added. (

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