Those of us in the telecoms sector have long been familiar with data centres as somewhat ungainly elements of network infrastructure – a little banal, but essential if you want higher compute speeds.
However, the rapid rise to prominence of AI in the past few years has in turn skyrocketed public consciousness of data centres – and they are not popular. Governments and tech companies alike have sold them as critical infrastructure, rubber-stamping construction permits regardless of local opposition, but the affected populace is not happy with the cost-benefit analysis.
There has been significant outcry over the constant noise (and, according to some, odour) produced by these facilities, as well as the amount of water and electricity they consume – particularly since that ‘critical’ designation indicates that they’ll be prioritised over local residents in the event of a shortage.
Your friendly neighbourhood data centre
These aspects were enough to make date centres an unpopular presence in residential neighbourhoods, but there’s also the lack of tangible benefit to communities in terms of employment. While new data centre announcements often hint at local job creation, in practice operations are largely automated and the insinuated employment opportunities typically fail to materialise – which itself can be read as a microcosm of the widespread fear that AI has been built with the ultimate goal of replacing a human workforce.
Public backlash against data centres is in full swing then, and the extent to which the facilities have become politically toxic may come as a shock to industry-watchers who considered data centres essential, but largely innocuous. Over the summer of 2026 – which notably saw record-breaking heatwaves and extreme weather events as a result of climate change, which data centres stand accused of fuelling – Malaysia and Thailand both abruptly pumped the brakes on their plans for encouraging data centre investment amidst growing public opposition. The governments of both southeast Asian nations have stated their intention to rethink data centre regulations following concerns over the impact on domestic communities.
Changing terms
While two nations placing an effective pause on data centre planning may not indicate that the tide is turning, the fact that both have taken action at all is indicative of the scale of the backlash – but it doesn’t necessarily mean that they’re having second thoughts on constructing data centres so much as working out the best approach to doing so. Matt Walker of MTN Consulting notes that governments are not deciding against further data centre investment – but they do see the public opposition growing in the US, and they want to get ahead of that curve.
“They are changing the terms”, says Walker. “Thai officials said the country is ‘not closed for business.’ In Malaysia, what has stopped is approval without conditions. Both countries realise that there is strong demand from outsiders for permission to build, so they have leverage.”
This strong demand was a deciding factor behind Malaysia’s sudden onset of cold feet – in July this year, a statement from treasury secretary general Johan Mahmood Merican suggested that Malaysia’s government had essentially attracted too much investment from overseas companies into the local data centre industry by offering overly favourable terms, saying “we perhaps overdid the red carpet for data centres to the extent that now we are almost getting too much of a demand.”
Walker agrees that in terms of price and process, governments – particularly in Southeast Asia – have been making investment ‘too attractive’ for data centre providers. This can involve tax incentives or more controversial carrots such as waiving environmental requirements or offering cheap power. He argues that the older model of competing for foreign capital has given way to riding the wave of demand amidst the AI gold rush, but notes that rising awareness of the downsides of the AI boom is becoming harder to ignore – particularly in terms of the lack of job creation.
“Perceptions may be catching up with reality”, says Walker. “Data centre construction generates some jobs, but data centre operation is almost entirely automated.” To highlight this contrast, he cites the March 2024 application economic table of a facility built in Nevada by Vantage Data Centers, which over a ten-year period listed 4,242 jobs supported by construction, versus just 73 for operation. “With increased automation and physical AI, the staffing needs for ongoing operation may be even lower.”
High energy and water demands
The underwhelming impact that data centres will have on the local job market is an understandable cause for governmental hesitancy – but interestingly, it is not the sole factor, Walker notes that governments are starting to balk at the power and water consumption of data centres – even in the unlikeliest of markets. “
He notes that on 3rd August 2026, Texas Governor Greg Abbott paused new data centre interconnections and announced an audit of whether projects supply their own power, bring and reuse their own water, and rely on tax incentives – and that this attitude is beginning to be echoed globally. “There is a real concern with price impact on other ratepayers and overall grid stability, it’s not just theoretical.”
Walker adds that while extreme weather events are not the stated reason in the Thai, Malaysian, Texas or New York announcements regarding data centre moratoriums that have been in the news this year, this does not mean that climate change is not a motivating anxiety – it’s just that water and power scarcity are the main concerns, particularly in markets affected by drought and unreliable power grids. South Africa has suffered from a load-shedding crisis for years, with widespread outages as recently as 2025. Walker notes that the South African government anticipates that in one instance -reportedly Cape Town – planned data centres will account for up to a third of the city’s current peak power demand.
The short-term political attention boost of a major construction project is increasingly being overshadowed by public debate about the downsides of AI, argues Walker – not least of which is genuine fear of the technology and its ultra-wealthy backers. This may prove difficult to assuage, but that should not deter governments from trying to find a balance.
“I believe governments should try to internalise externalities”, says Walker. “The world is facing a climate change crisis – not in the future, but today, and the main cause is burning carbon and not charging for it correctly. If we want to turn society over to the AI overlords, they should at least pay their fair share. They are causing a massive spike in power demand that has trickle down effects on other sectors. They are often owned by companies that use clever accountants and lawyers to help them avoid paying taxes and avoiding regulation. Their owners hire lobbyists that persuade governments to craft rules to help them get richer. All of this has gotten extreme in the last three years, and there is a rising backlash.”
