--- title: "Power shortages, water shortages, labor shortages, and land grabs! The construction boom of data centers in the United States faces obstacles" description: "The data center infrastructure frenzy initiated by tech giants is facing a severe \"reality wall\": from grid capacity and water resource bottlenecks to a shortage of skilled workers, execution risks ar" type: "news" locale: "en" url: "https://longbridge.com/en/news/276290793.md" published_at: "2026-02-19T01:21:31.000Z" --- # Power shortages, water shortages, labor shortages, and land grabs! The construction boom of data centers in the United States faces obstacles > The data center infrastructure frenzy initiated by tech giants is facing a severe "reality wall": from grid capacity and water resource bottlenecks to a shortage of skilled workers, execution risks are sharply rising. Giants like Amazon are bidding astonishingly high prices for land, directly squeezing residential development, and even spending $700 million to acquire plots originally intended for housing. This resource competition not only drives up operational costs but may also dampen the return expectations for AI investments, posing real challenges to the market's optimistic assumptions about technology-driven growth The data center construction boom driven by the artificial intelligence revolution is encountering real-world obstacles. From grid capacity and water resources to skilled labor and land competition with residential development, this infrastructure frenzy led by tech giants like Microsoft, Alphabet, Meta, and Amazon faces multiple constraints, with execution risks rising, potentially dragging down market optimism regarding AI investment returns. Goldman Sachs analyst Brian Singer's recent conversation with Mark Monroe, former chief engineer of Microsoft's data center senior development team, revealed three key bottlenecks: **Electricity remains the most pressing immediate constraint, water resource pressures are forcing the industry to shift to more energy-intensive cooling technologies, and a shortage of skilled labor may become the next hurdle.** Monroe warned that by 2030, the U.S. will need to add over 500,000 manufacturing, construction, operations, and transmission workers to meet the electricity demands of data centers. Meanwhile, **tech giants are purchasing land at unprecedented prices across the U.S., directly squeezing residential development.** According to The Wall Street Journal, Amazon spent $700 million last November to acquire part of a parcel in Virginia that residential developer Stanley Martin had purchased for just over $50 million years ago. In Northern Virginia, rural land that once sold for tens of thousands of dollars per acre is now priced at over $3 million, making it impossible for residential developers to compete. Whether this construction boom can continue is tied to the core assumptions of the current macro narrative and tech stock valuations—that is, data center investments can translate into measurable productivity gains and support years of growth. However, supply chain bottlenecks, infrastructure constraints, and community opposition are accumulating, potentially leading to overly optimistic expectations falling short. ## Electricity Bottleneck is Most Urgent Electricity supply remains the most critical immediate constraint facing data center deployment. Monroe pointed out that while cloud computing and AI inference workloads typically need to be close to end users—leading to power shortages in crowded markets, **AI training workloads are not sensitive to geographic location and are migrating to remote areas with ample power supply.** Flexible load management could free up some capacity, but adoption is hindered. A study from Duke University showed that if data centers accepted an annual load reduction of 0.25% (99.75% online time), it could add 76 gigawatts of load, equivalent to 10% of the peak total demand in the U.S.; if they accepted a 0.5% reduction (99.5% online time), it could add 98 gigawatts. However, Monroe stated that the promotion of this solution is obstructed by the industry's inherent risk-averse culture—frequent switching of IT equipment makes operators uneasy and may require stronger financial or regulatory incentives. **On-site generation (Behind-the-Meter) has become an expensive temporary solution.** Although only a single-digit percentage of data centers under construction are applying for on-site generation, Monroe emphasized that these are typically large data centers, and their impact on power demand is still significant. These solutions mainly deploy natural gas simple cycle generators, costing 5 to 20 times more than grid power. However, considering the enormous profitability of large AI data centers, advancing projects with on-site generation remains economically viable Monroe stated that the ultimate goal of deploying on-site power generation data centers is to connect to the grid within three years, at which point they will either relocate to other data centers, integrate and sell electricity back to the grid, or eliminate on-site power generation assets. ## Water Resource Constraints Bring Energy Consumption Costs The pressures from communities, regulations, and advancements in chip technology are driving the industry towards cooling technologies that use less water but consume more energy. Monroe indicated that as community, regulatory, and technological pressures intensify, **the industry is shifting from traditional high-water consumption evaporative cooling methods to designs that use less water, particularly among hyperscale operators.** This transition brings significant energy efficiency losses. Monroe pointed out that the shift to closed-loop and waterless cooling systems could raise the Power Usage Effectiveness (PUE) from an optimal level of 1.08 to 1.35-1.40, meaning energy expenses could surge from 8% for evaporative systems to 35%-40%. Although innovations such as direct chip liquid cooling and high-temperature water cooling can achieve more efficient heat transfer in more geographical locations, colocation data centers may still adhere to chilled water unit designs due to their diverse customer base and the need to determine cooling architecture early in construction. Monroe noted that while the share of evaporative cooling in overall data center cooling solutions may decline, the demand for chilled water units will still rise significantly over the next decade due to the overall growth in data center capacity. ## Shortage of Skilled Workers Becomes the Next Hurdle Monroe warned that the shortage of skilled workers could become the next threshold factor for data center deployment. The distinction between data centers and ordinary industrial buildings lies in the specialized electrical and mechanical systems required, making electricians and plumbers crucial for data center construction. Industry organizations are collaborating with technical universities and colleges to develop training programs to fill this gap and are attempting to engage students from middle school to make the technical industry a more attractive career path. According to Goldman Sachs, **by 2030, the U.S. will need to net add over 500,000 workers in manufacturing, construction, operations, and transmission and distribution to deploy all the electricity needed to meet demand.** ## Tech Giants Compete for Land Driving Up Prices **Data center developers are acquiring land at prices far exceeding other uses, directly impacting residential construction.** According to The Wall Street Journal, when Stanley Martin CEO Steve Alloy was preparing to develop 516 new homes in Bristow, Virginia, five years ago, he found that surrounding land was being purchased by tech giants like Microsoft and Google. By November of last year, the company sold part of the land it had acquired for over $50 million several years earlier for $700 million to Amazon, becoming one of the largest land transactions in U.S. history. Northern Virginia has become the global capital of data centers. The region boasts open land, a growing power infrastructure, and a dense fiber optic network laid during the internet bubble era. Loudoun County is home to a cluster of facilities known as "Data Center Alley," while the world's largest tech companies are also moving south into Prince William County along Interstate 95 **Soaring land prices leave residential developers unable to compete.** In Northern Virginia, developers are sending letters to landowners with offers as high as $1 million per acre. Some rural land that once sold for tens of thousands of dollars per acre is now priced over $3 million. In Elk Grove Village, a data center hub near Chicago, Stream Data Centers purchased and demolished a 55-unit residential complex in 2024 for nearly $1 million per building to construct three data centers totaling 2.1 million square feet. Along U.S. Highway 67 near Dallas, land that sold for $20,000 to $40,000 per acre three years ago has now jumped to over $350,000 in some areas. Residential land developer Scott Finfer stated, "Residential builders simply cannot make these numbers work." Looking ahead, the key question is whether the U.S. can sustain the ongoing surge in capital expenditures for data centers, considering that these constructions are deeply embedded in the macro narrative and tech stock valuations. The investment thesis assumes that continued construction will translate into measurable productivity gains, leading to years of growth. 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