AI demand is reshaping US data center strategy as developers prioritize existing projects and explore orbital computing, Wood Mackenzie said in a Tuesday note.
US developers expanded disclosed data center capacity by 36 gigawatts in Q1, down 19% from the prior quarter as regulatory and grid constraints shifted investment to existing projects, Wood Mackenzie said.
Texas remained the largest development market with over 96 GW of planned capacity after adding 6.4 GW, or 14%, during the quarter. Ohio followed, while Utah, New Mexico and West Virginia attracted large proposed campuses.
Total disclosed US data center capacity reached 331 GW, with 43% under active development. Although 53% of projects cleared permitting, they represented only 32% of total capacity, according to the note.
Large developers continued to dominate the pipeline, while established operators diversified geographically. New entrants targeted Texas and Utah to capitalize on gas supply and land availability, Wood Mackenzie said.
Utilities signed construction or electricity supply agreements covering 195 GW, equal to 26% of 2025 US peak load. Capacity in advanced discussions climbed from 37 GW to 107 GW, the note said.
PJM and ERCOT accounted for 69% of committed and construction capacity. Over one-third of PJM's pipeline carried high confidence, while 86% of ERCOT commitments remained speculative or in early-stage studies.
Developers increasingly adopted around-the-meter power strategies, especially in Texas. Natural gas represented 40% of deployments and 48% of site capacity, while renewables and battery energy storage systems accounted for 41% of deployments and 38% of capacity.
Disclosed project capital expenditure topped $1 trillion, with just 6% of projects accounting for 42% of tracked spending as per-megawatt and per-square-foot costs declined, Wood Mackenzie said.
Developers are navigating a more complex regulatory landscape as policymakers accelerate grid interconnections while balancing affordability, faster power access and decarbonization goals, according to the note.
Wood Mackenzie said artificial intelligence is also driving interest in orbital data centers as power, land, permitting and labor constraints increasingly challenge conventional facilities.
Advances in launch technology, semiconductors and space-based solar power have moved orbital data centers into early testing, although high launch costs continue to limit commercial deployment.
Radiation, thermal management and reliable space-to-Earth connectivity remain major engineering hurdles, though continued technological advances could improve the long-term outlook, according to Wood Mackenzie.
US data centers will consume about 20% of the nation's electricity by 2035, up from 5.9% at current levels and 12% projected for 2030, according to a Bloomberg report.
BloombergNEF raised its 2035 US data center demand forecast to 194 GW, up 83% from its December outlook, and projected a 19-GW supply shortfall despite annual grid connections of 7.1 GW and additional on-site gas generation, the report added.