Moody’s Warns Data Center Boom Is Becoming a Credit Risk for State Governments

The surge in data center construction, fueled by artificial intelligence, cloud computing, and data storage, is overwhelming public electricity and water systems, Moody’s Ratings warns in a June 2026 report.

The credit rating agency says the infrastructure costs and resource demands are boosting fiscal pressure on state and local governments. The most desirable locations for hyperscale projects-those with cheap power and fiber connectivity-are often already near capacity.

At least 14 states are considering moratoriums in 2026 to assess the impact before committing to long-term policy. By contrast, Michigan and West Virginia have enacted incentives to attract data center investment.

For municipal bond investors, the moratorium movement introduces regulatory risk. Delayed or canceled projects could erode the property tax revenues that local governments counted on to fund grid upgrades, potentially affecting credit quality.