New York is pumping the brakes on new AI data centers.
Gov. Kathy Hochul announced Tuesday the first state in the nation to suspend the use of what she described as “energy-intensive” AI data centers, or “hyperscale” facilities.
Hochul said the Democratic governor signed an executive order halting construction of large-scale AI data centers for a year so the state can develop new rules to protect its energy grid, natural resources and communities.
“These hyperscale AI data centers will consume enormous amounts of power, threatening to exceed the capacity of our nation’s power grid and driving up costs for local ratepayers,” Hochul said at a press conference. “And I refuse to pass that cost on to New Yorkers who already pay too much for their energy bills.”
The move quickly became controversial. Pennsylvania Democratic Sen. John Fetterman reacted to the news, posting, “China won.”
Shares of data center companies including Digital Realty Trust, Vertiv Holdings and Equinix plunged on the news, dropping as much as 2% early Tuesday.
“We have no choice but to address these challenges.”
Hochul said AI data centers would require millions of gallons of water, increase carbon emissions, take up large tracts of land and could emit “disruptive” noise and vibrations to nearby residents.
The governor said New York “has no choice but to address the challenges these large facilities create.”
Additionally, Hochul said New York state data centers would be required to generate their own electricity or pay a premium to use the state’s power grid.
“This is the only way to ensure residents and businesses get the energy they need at an affordable price, and with power capacity already at its limits, we have a lot of work to do,” Hochul said.
In response to the executive order, Vermont Sen. Bernie Sanders pointed out in X that his AI data center moratorium bill was “called a radical idea” just a few months ago.
“Today, New York becomes the first state to enact a moratorium, and a majority of voters nationwide support it,” Sanders, an independent, wrote. “AI needs to benefit all of humanity, not just a few Big Tech billionaires.”
Hochul said New York wants AI companies to invest and grow in the state, but not at the expense of communities and infrastructure. The governor also said he aims to eliminate the sales tax exemption for large data centers across the state.
Hochul’s executive order is narrower than the AI data center moratorium bill passed by the state Legislature last month, applying only to facilities with power demands of 50 megawatts or more, rather than the bill’s standard of 20 megawatts.
The governor’s office told Business Insider it will continue to work with Congress to further consider the bill, called the Responsible Data Center Development Act.
State Sen. Kristen Gonzalez, the bill’s sponsor, praised Hochul’s executive order at the governor’s press conference, saying Hochul “sets the standard that technology should improve our lives, not pollute the environment, burden the energy grid, or drive up our utility bills.”
Hochul’s suspension comes as tech giants race to build massive data centers across the United States to power AI technologies such as large-scale language models.
The rapid construction of these data centers has become a national flashpoint, with critics warning about the strain on energy demands, water consumption and local infrastructure.
A recent Gallup poll found that 71% of Americans surveyed oppose the construction of an AI data center in their hometown, far more than the 53% of respondents who said they opposed the construction of a nearby nuclear power plant.