Wall Street Banks Factor Local Protests into Data Center Risk Assessments

U.S. banks and asset management firms are now considering local community protests when evaluating credit risks for data center projects. This insight comes from reports by Reuters, citing executives from various financial organizations on Wall Street.

According to these executives, when assessing project financing, lenders take into account the objections of local communities and prefer states that are more welcoming to such constructions. Despite this, interest in the sector remains strong.

“I focus on two primary aspects. The first is project readiness, and the second is its credit quality. Readiness means having all necessary permits and approvals, as well as support from the local residents,” stated Karen Fan, head of infrastructure and sustainable finance at Bank of America.

Other sources mentioned that financing discussions typically commence at least a year prior to construction and continue throughout the building phase. Therefore, if a project falls through, it results in wasted time and extra due diligence for the bank.

“The workload required to secure bank financing for such a project is substantial. Signing the loan agreement is merely the beginning. Throughout construction, developers must repeatedly confirm compliance with financial covenants and monitoring requirements agreed upon with lenders before each disbursement,” explained Kevin Curtin, head of investment banking for AI infrastructure at JPMorgan.

Sharon Yeshaya, CFO of Morgan Stanley, described the sector as capital-intensive and reliant on external funding. The bank assists clients in raising capital, organizing syndications, and ensuring complete execution, while also finding ways to mitigate risks, she emphasized.

Cancelled and Blocked Projects

Data from Data Center Watch indicates that in the first quarter of 2026, at least 75 projects worth around $130 billion faced local opposition. Furthermore, according to Goldman Sachs, spending by major tech companies on AI is projected to exceed $6 trillion by 2030, significantly surpassing investments in internet infrastructure during the dot-com era.

Companies like Microsoft, Meta, Oracle, Amazon, and Alphabet have already accrued approximately $1.09 trillion in future leasing obligations, primarily for AI-focused data centers.

Banks are already involved in several contentious projects. JPMorgan and Morgan Stanley facilitated a $12.3 billion bond issuance for BlackRock, a partner of Meta on a data center in El Paso, Texas, as reported by Reuters.

Neither JPMorgan, Morgan Stanley, nor BlackRock provided comments. However, Meta stated that it is engaging with residents, authorities, and local organizations.

QTS, owned by Blackstone, reportedly did not seek bank financing for its Prince William Digital Gateway project in Virginia, which faced significant resistance and was terminated in July. QTS declined to comment.

Morgan Stanley and KKR Capital Markets have become the lead arrangers for a $9.7 billion credit line for the Dallas-based operator CyrusOne. Local residents oppose its $500 million project in Sangamon County, Illinois.

CyrusOne confirmed that financing has been secured but did not disclose details. A source indicated that part of the line can only be allocated to new construction once all permits and lease agreements are in place.

Bank of America is acting as the structuring agent and financial advisor for Related Digital, the developer of a $16 billion campus in Michigan (a project for Oracle). This project has also faced community discontent but continues to progress.

Industry Efforts to Address Concerns

An anonymous foreign bank representative stated that investors are already factoring in the risk of project cancellations into pricing, anticipating sustained demand for computing power. Operators are also taking steps to avoid conflicts early on; for instance, they are considering building their own power plants on-site.

Operators are attempting to mitigate conflicts even at the design stage, such as exploring the construction of dedicated power generation facilities, noted Rajat Rana, a lawyer at Quinn Emanuel Urquhart & Sullivan. In August, it was announced that Amazon would construct a data center campus in Pecos County, Texas, featuring its own 7.65 GW gas power plant.

Simultaneously, Crusoe and Aalo have announced plans for an AI factory powered by small nuclear reactors.

Meanwhile, authorities at various levels—from local to national—are increasingly suspending, limiting, or outright banning the construction of such facilities. In mid-July, New York Governor Kathy Hochul signed an executive order imposing the first state-level moratorium on large data center constructions in the United States.

Residents' main concerns include noise, the visual impact of buildings, rising electricity rates, and increased water consumption. The issue has also extended beyond the U.S., with the UK predicted to face a water crisis due to the scaling of AI.

Notably, at the beginning of August, Ray Dalio, founder of Bridgewater Associates, likened the excitement surrounding artificial intelligence to the crises of 1929 and 2000.