U.S. spending on data centers and information-processing hardware has surpassed residential housing investment, reaching 752 billion dollars in the second quarter as the artificial intelligence boom reshapes the national economy and sparks mounting local pushback.
The artificial intelligence infrastructure boom is altering the drivers of U.S. growth, shifting capital away from housing and toward computing hardware. Hyperscale technology companies are pouring capital into data center development so rapidly that annual spending from a handful of firms is projected to reach 1 trillion dollars soon.
According to Bureau of Economic Analysis data analyzed by Fortune, real private residential fixed investment stood at 748 billion dollars in the second quarter, marking an 18 percent decline from its early 2021 peak. Over that exact same timeframe, inflation-adjusted spending on information processing equipment climbed 51 percent to reach 752 billion dollars.
“We’re seeing a pivotal shift in the US economy: investment is shifting away from residential investment and towards computers.”
Adam Shapiro, vice president at the San Francisco Fed
Interest Rates Freeze Housing While AI Borrowing Accelerates
The divergence between housing and tech investment highlights an economic contrast driven by monetary policy. While the Federal Reserve’s post-2022 rate-hiking campaign to tame inflation hit the interest-sensitive housing market hard, artificial intelligence capital expenditures have remained less sensitive to borrowing costs.
The benchmark 30-year mortgage rate hovers near 7 percent as the 10-year Treasury yield touches its highest level since 2007. This environment has kept the housing market largely frozen.
By contrast, technology giants are aggressively issuing debt and drawing down cash piles to fund infrastructure. Alphabet even reported negative cash flow earlier this year. Treasury Secretary Scott Bessent noted that corporate debt issuance for technology expansion is proceeding regardless of cost.
“We are also seeing big corporate issuance. And a lot of that corporate issuance, I would say, is almost yield-agnostic, because the build-out for AI, the returns on that, the companies believe they’re going to be so high. They don’t really care what they’re paying.”
Scott Bessent, Treasury Secretary
S&P Global estimates that combined capital expenditures from Alphabet, Amazon, Microsoft, Meta, Oracle, and SpaceX will exceed 1.3 trillion dollars in 2027, up from a projected 870 billion dollars in 2026 and 470 billion dollars in 2025. The ratings agency warns that this aggressive build-out is outpacing revenue growth, projecting negative collective operating cash flow for the six hyperscalers across 2026 and 2027 before an anticipated 2028 inflection point.
Municipalities Push Back With Moratoriums and Zoning Pauses
As the construction boom accelerates, it is running headfirst into grassroots resistance over water consumption, noise, and power grid strains. Municipalities are responding by pausing new facility approvals.
In Georgia, where Atlanta has grown into the second-largest data center market in the U.S., local governments are establishing regulatory guardrails. Following OpenAI’s late July proposal for a facility in Effingham County—projected to require 3.2 gigawatts of power—the Savannah City Council unanimously approved a 155-day moratorium on large-scale data centers. Savannah Mayor Van Johnson emphasized the need for thoughtful policy before the market dictates terms to the city.
“Herein lies an opportunity for us to put the pause button on and really come up with thoughtful, responsible policy.”
Mayor Van Johnson, Savannah, via Savannahnow
Savannah’s ordinance targets facilities with an electrical capacity of 10 megawatts or greater and prevents industrial warehouses exceeding 200,000 square feet from being converted into data centers.
Political Backlash and Economic Realities Shape Public Sentiment
The friction between rapid technological expansion and local communities has emerged as a prominent issue. Public polling reveals skepticism regarding the proliferation of mega-facilities. Separate polling from NBC News indicated that 64 percent of registered voters would be less likely to support a political candidate favoring data center construction in their community.
Labor markets, meanwhile, are feeling the direct impact of the capital shift. Staffing executives note that facilities and construction represent one of the few expanding hiring categories, with demand up 46 percent year to date driven by data center development. Whether this infrastructure surge can sustain its current pace without triggering severe energy bottlenecks or overcapacity remains the central economic question as the midterm elections approach.
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