New York is pumping the brakes on new AI data centers.
Gov. Kathy Hochul on Tuesday unveiled the nation's first statewide moratorium on what she described as "energy-guzzling" AI data centers, or "hyperscale" facilities.
The Democratic governor signed an executive order placing a one-year pause on the construction of large-scale AI data centers so that the state can develop new rules to protect its energy grid, natural resources, and local communities, Hochul said.
"These hyperscale AI data centers consume enormous amounts of power, truly threatening to outpace our grid's capacity, and they drive up costs for local ratepayers," Hochul said at a press conference. "And I refuse to let those costs be passed on to New Yorkers who already pay too much for their utility bills."
The move immediately proved controversial. Democratic Sen. John Fetterman of Pennsylvania reacted to the news by posting, "China wins."
Shares of data center companies, including Digital Realty Trust, Vertiv Holdings, and Equinix, dipped on the news, falling as much as 2% early Tuesday.
'No choice but to address these challenges'
Hochul said that the AI data centers require millions of gallons of water, can increase carbon emissions, occupy large amounts of land, and can emit "disruptive" noise and vibrations for nearby residents.
The governor said that New York has "no choice but to address these challenges created by these massive facilities."
Additionally, Hochul said that New York will require data centers to either produce their own power or pay a premium to use the state's electric grid.
"It's the only way to ensure that our residents and businesses have affordable energy that they need, and that our power capacity is already stretched to its limit, so we have so much more to do," said Hochul.
In response to the executive order, Vermont Sen. Bernie Sanders pointed out on X that his AI data center moratorium bill "was called a radical idea" mere months ago.
"Today, New York became the first state to enact a moratorium and a majority of voters nationwide support it," Sanders, an independent, wrote. "AI must benefit ALL of humanity, not just a handful of Big Tech billionaires."
Hochul said New York wants AI companies to invest and grow in the state, but not at the cost of its communities and infrastructure. The governor also said she's aiming to repeal sales tax exemptions for large-scale 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 20-megawatt threshold.
The governor's office told Business Insider that it will continue working with the legislature and further review the bill called the "Responsible Data Center Development Act."
State Senator Kristen Gonzalez, a sponsor of that bill, hailed Hochul's executive order during the governor's press conference, saying that Hochul is "setting the standard that technology should improve our lives, not pollute our environment, strain our energy grid, or drive up our utility bills."
Hochul's moratorium comes as tech giants race to build massive data centers across the US to power AI technologies such as large language models.
The fast-paced buildout of these data centers has become a flashpoint nationwide, with critics sounding the alarm over energy demand, water consumption, and the strain on local infrastructure.
A recent Gallup poll found that 71% of Americans surveyed oppose constructing AI data centers in their local area, far more than the 53% of respondents who said they would oppose the construction of a nearby nuclear energy plant.
