New York Data Center Moratorium is Bad for the State and America

Gov. Kathy Hochul (D-N.Y.) has implemented a one-year ban on new large data center projects. The state’s data center moratorium will have profoundly deleterious consequences, including lost investment, fewer jobs, diminished tax revenues, and potentially forgone life-saving innovations. Not only is it a disaster for the state, it represents a broader setback for America as the nation engages in heated competition with China for global technological supremacy in the AI age. 

Data centers are the engines that power the modern digital economy.  Every smartphone, digital app, streaming service, website, and artificial intelligence (AI) model depends on data centers. Without them, the public would face fewer choices, lesser services, or higher prices for the many digital applications and services they enjoy today. 

America’s data industry has also been producing record-setting investment, providing the equivalent of “a massive private sector stimulus program,” which is propelling our current economy forward. In January, the Federal Reserve Bank of St. Louis found that, “[r]ecent investments in AI-related categories have contributed significantly to the real GDP growth in 2025. It has surpassed the contribution of [information technology] components to the real GDP growth made during the dot-com boom, both in levels and as a share of GDP.” Going forward, according to Morgan Stanley, large tech companies are expected to spend nearly $3 trillion on AI projects through 2028.

New York apparently wants to end all that with this moratorium, on top of all the other AI regulations the state is currently pushing. New York lawmakers have introduced more regulatory proposals than any other state, with over 200 AI-related bills now pending, and many passing. 

The state appears to be following the European Union’s (EU) disastrous model for energy and technology policy with heavy-handed bans and restrictions instead of pursuing investment and economic development. A press announcement from the European Commission last month noted how, “Europe remains heavily dependent on suppliers outside the European Union for core digital technologies and as demand for computing capacity rises sharply with the spread of AI.” The cause was European over-regulation of tech markets, as EU-sponsored reports, countless academic studies, and many news reports have shown.

Like Europe, New York lawmakers apparently believe they can regulate energy and AI innovations in their territory without regard to the costs and consequences, and then hope they can somehow still develop their domestic technology base to meet all their future market needs. As they say, you cannot have your cake and eat it too. In reality, such moves just undermine domestic industry and options, making governments far more dependent upon surrounding jurisdictions for their energy and technology needs, while also making their citizens poorer. This is already what happened in New York following the state’s fracking ban a decade ago. Data center bans could end up being a replay of that mistake, and could also look like America’s hampering of its domestic nuclear industry over the past half century, as federal and state over-regulation made it impossible to develop critical energy infrastructure and options.  

Businesses and consumers will suffer because of New York’s move. At some point, AI developers and application providers may need to create special degraded products for the New York market, or even impose new surcharges for the state if New York will not allow them to create the new data centers needed to power their services. Some firms and jobs will likely flee the state as a result. State and local tax revenues will also decline if this occurs. 

Many Democrats are fond of saying that America needs to do more to invest and build important public infrastructure and create new jobs. New York’s data center ban directly undercuts that objective and simultaneously leaves the nation more vulnerable in the great global AI race. “China wins,” Sen. John Fetterman (D-Pa.) said in response to the New York announcement. “I refuse to help hand the lead in AI to China,” Fetterman said in response to earlier moratorium proposals. “The AI chassis can either come from China or the USA.” Sen. Fetterman is right. If our nation hopes to build the computational capacity needed to ensure America stays ahead of China in this next great industrial revolution, we cannot be hitting the brakes on the very engines that power it. America should build them. 

New York’s data center moratorium also undermines the stated objectives of the leading member of the state’s own congressional delegation. In 2024, Sen. Chuck Schumer (D-N.Y.) chaired a bipartisan task force that considered ideas for promoting America’s technology base. The resulting report on “Driving U.S. Innovation in Artificial Intelligence” included dozens of proposals to accelerate domestic AI innovation and build out the nation’s computational infrastructure. In a January 2025 speech, Sen. Schumer also warned of the consequences of getting AI policy wrong. “If America falls behind China on AI, we will fall behind everywhere: economically, militarily, scientifically, educationally, everywhere,” he correctly noted. It would be particularly concerning “if China beats the U.S. on the ultimate goal of AGI, artificial general intelligence,” he said. “We cannot, we must not allow that to happen.”

That danger is now all too real as his home state of New York puts shackles on AI infrastructure developers.