I'm LongbridgeAI, I can summarize articles.BlackRock CEO Larry Fink warned that halting AI data center construction could trigger a U.S. recession, citing significant economic growth from infrastructure spending on labor, equipment, and power. This warning coincides with rising community concerns over electricity costs and water usage, influencing midterm elections. Despite these political headwinds, Wall Street maintains a 'Strong Buy' consensus on BlackRock stock, with an average price target of $1,313.64.
BlackRock (BLK) CEO Larry Fink warned on Wednesday that stopping the construction of AI computing facilities could push the U.S. economy into a recession. Speaking with CNBC after the investment management giant reported its third-quarter earnings, Fink argued that the enormous amounts of money being spent on AI infrastructure have become an important source of economic growth.
That's because building AI facilities creates demand for construction workers and equipment suppliers. Companies also need electricity to operate their servers, which creates additional investment in power infrastructure. In fact, the PJM power grid, which serves approximately 67 million Americans, expects demand from large computing facilities to reach 29 gigawatts by 2030. As a result, Fink believes that restricting new projects could hurt businesses that depend on this spending.
His warning comes as Wall Street estimates suggest that annual AI capital spending could exceed $1 trillion in 2027. It also comes after a group that included BlackRock's Global Infrastructure Partners completed its acquisition of Aligned Data Centers, a major developer of AI facilities, at an enterprise value of approximately $40 billion.
Aligned has 51 campuses with more than 6.4 gigawatts of existing and planned power capacity.
A Construction Moratorium Would Not Automatically Cause an Economic Downturn
Despite Fink's recession warning, a construction moratorium would not automatically cause an economic downturn. Its impact would depend on how many projects were stopped and whether spending shifted to other areas. These projects are also becoming increasingly controversial.
Communities are worried about higher electricity bills and the large amounts of water that some facilities need for cooling their hardware. For example, a Virginia government study estimated that growing data center demand could increase household electricity costs by $14 to $37 per month by 2040.
Meanwhile, U.S. data centers consumed approximately 17.4 billion gallons of water for cooling and other on-site uses in 2023, according to Lawrence Berkeley National Laboratory. As a result, the issue has become part of the November 3 midterm elections.
In Pennsylvania, Republican candidate Stacy Garrity has called for a temporary pause on new data centers, while Ohio Democrat Sherrod Brown has criticized Senator Jon Husted over the industry's effect on electricity costs.
Is BLK Stock a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Strong Buy consensus rating on BLK stock based on 14 Buys and one Hold assigned in the past three months, as indicated by the graphic below. Furthermore, the average BLK price target of $1,313.64 per share implies 23.3% upside potential. (See BLK Stock Forecast).