AI, interrupted.
For the last twenty years, Silicon Valley – technology’s epicentre – enjoyed a relatively frictionless relationship with the rest of society. We celebrated its invention and innovation, the high-paying jobs it created and the investment returns.
But after twenty years, the marriage appears to be dissolving.
In Robert Bryce’s 9½-minute documentary, The Data Centre Backlash, a grassroots anti-data-centre movement is shown rising worldwide, from Texas to Ireland.
The doco shows local communities waking up to the unquenchable demands that generative AI and hyper-scale cloud computing place on local water and electricity grids – and they’re pushing back successfully.
Numbers behind the backlash
You may think the opposition to data centres is a motley collection of isolated NIMBY (Not In My Back Yard) hippie complainants. Not so. The movement has evolved into a structured, widespread political movement.
In 2024, the tally of formal U.S. data centre rejections, moratoriums, and severe zoning restrictions stood at 21. In 2025, that number was 61 rejections. As of the first quarter this year, there were 68 rejections recorded, and as of today, 77 rejections have been recorded in 2026.
According to Robert Bryce’s Data Centre Rejection Database, the total count of recorded data centre rejections, moratoriums, and severe zoning restrictions in the United States alone has reached 313 in 2026 (with 414 total rejections logged worldwide).
Loudoun County, Virginia, is considered the data centre capital of the world and home to 233 data centres (the largest concentration in the U.S.), yet after months of intensive study, the County Board of Supervisors voted 7-1-1 to enact a one-year halt on all new data centre applications.
What this means for AI revenue projections
Wall Street analysts, venture capitalists, and big tech founders and execs have built their AI valuation models on an aggressive, linear assumption about building compute and the revenue that somehow magically follows.
The widely documented multi-hundred-billion-dollar infrastructure spending sprees of the hyperscalers (Microsoft, Google, Amazon, Meta) rely on exponential scaling curves for AI monetisation. But this remains entirely speculative, with proponents typically citing Jevons Paradox to justify their optimism.
We have previously written that investors’ assumptions typically and ignorantly project a smooth 45-degree north-easterly line, an uninterrupted growth profile. In the real world, that rarely happens. And now the grassroots backlash against AI data centres provides the structural bottleneck that disrupts that 45-degree growth assumption.
AI models require staggering amounts of continuous power and water for cooling. When counties like Loudoun enforce year-long moratoriums – and when local U.S. municipalities reject dozens of proposals – tech companies lose the physical real estate needed to deploy next-generation Graphic Processing Unit (GPU) clusters. Without the physical servers running continuously, projected enterprise AI software revenues cannot scale.
NVIDIA’s growth must slow, and not only because of the law of large numbers.
Spiking capex and delayed ROI
To circumvent local opposition, tech giants have to engage in expensive workarounds, such as building private energy-generation facilities in partnership with nuclear or natural gas plants, and fighting protracted, costly legal battles and zoning disputes.
These frictional costs inflate capital expenditure (capex) while simultaneously delaying deployment schedules. Consequently, projected Returns on Investment (ROI) are pushed further into the future, threatening quarterly earnings expectations at a time when these companies’ valuations are already highly sensitive to rising interest rates.
Finally, as the grassroots movement ‘takes root’ in legislation in some states, citizens in other states are emboldened to act and, as zoning boards face intense voter pressure, restrictions become harsher and more widespread. The consequence is that investors have to price in a permanent regulatory risk premium into tech stocks.
Conclusion
Like almost all General Purpose Technologies (GPTs) before, AI gold rush investors assumed AI could expand infinitely without colliding with physical realities such as development delays, water, electricity, and councils. For AI investors – and possibly even index investors more broadly – Robert Bryce’s short doco suggests AI might play out like all those GPTs before it.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
