Surging demand for data center construction may contribute to a rise in U.S. inflation and be a factor in changing the Federal Open Market Committee's policy bias to neutral at next week's meeting, according to Macquarie Group strategists.
The buildout of data centers has created a "gold rush" for construction workers, pushing up wages and "lucrative perks," Macquarie Global FX and Rates Strategist Thierry Wizman said in an email to.
That may boost inflation due to higher wages, growing demand for workers, and corporate investment in the centers, while also increasing demand for materials and commodities such as copper, Wizman said.
"As hyperscalers race against condensed timelines, an industry-wide shortage of hundreds of thousands of skilled tradespeople has forced developers to pay a premium for labor," he said. "It may be a factor in helping the FOMC change its policy bias from easing to neutral on June 17."
CME's FedWatch Tool puts the odds of a rate reduction next week at only 3.6%.
Private employment will increase by 4% to 5% in the first five or six years in counties where data centers open, according to The Brookings Institution, a Washington-based public policy think tank.
Construction employment will jump 11%, and IT employment will grow by 22%. Wages are forecast to rise by 3% to 4%, Brookings said.
Building firms will be among the beneficiaries of increased spending on AI data centers as demand for the facilities continues to grow, company executives and analysts said.
Spending on data center construction in the U.S. in April jumped to a seasonally adjusted annual rate of $50.7 billion, up 28% from the same month a year earlier, according to an Associated Builders and Contractors analysis of data published by the Census Bureau. Global spending on buildouts may rise to $7 trillion by 2030, according to a report from consulting firm McKinsey & Co.
The largest construction companies will likely benefit the most from the buildout, which requires large amounts of land, energy, and water, and have jumped at the opportunity to erect the massive facilities as well as adjacent projects such as roads, power sources, and water storage.
About 42% of Associated Builders and Contractors members with more than $100 million in annual revenue are under contract to work on data centers, ABC Chief Economist Anirban Basu said in a May report.
"Those data center projects have buoyed the ABC Construction Backlog Indicator and kept ABC members confident about their outlooks, at least on the whole," Basu said later in a June 1 report.
Many contractors expect construction of the facilities to boost their revenues throughout the next five to 10 years.
"Generally speaking, we continue to see hyperscalers signaling a multi-year surge in demand for data center and power infrastructure," Fluor Corp. (FLR) Chief Executive Officer James Breuer told analysts on a conference call on May 8. Proposed sites, however, are increasingly being met with opposition from the public, shifts in the regulatory landscape, and rising borrowing costs.
Seven in 10 Americans oppose local construction of AI data centers, with 48% of those polled saying they "strongly" oppose, according to a Gallup survey conducted in early-to-mid March.
Power demand from data centers in the U.S. is expected to more than double to 66 gigawatts in 2027 from 31 gigawatts in 2025 due to increased AI infrastructure, Goldman Sachs Commodities Research said in a report last month.
Increased water and energy consumption and the effects of the data centers on the environment were among the top reasons given by those who opposed construction.
Almost 500 legislative bills have been filed in more than 40 states this year so far, marking a shift to regulatory oversight from incentive-focused policies, and several states have established moratoriums to give time to study the impacts, according to Multistate, a government relations company. Including legislation that carried over from 2025, more than 700 bills are active.
"Even this number understates the activity slightly because states which did not have a regular session this year are considering action in the interim (such as Texas) and governors have been increasingly weighing in absent legislative action," Multistate vice president Morgan Scarboro said in an email.
Rising borrowing costs also may be giving AI companies pause.
The yield on 10-year Treasuries spiked in May, rising to its highest level in more than a year, increasing interest rates for borrowers for large-scale projects and causing hesitancy among companies looking to construct facilities.
Still, the data center boom is coming at the right time as construction companies are facing a lull in other private-sector projects. Total construction spending in April totaled $2.17 trillion, up 0.4% from March and up 0.9% on an annual basis, according to Census Bureau data.
Benj Harding, vice president of the Industrial and Energy Division for Granite Construction (GVA), said the AI buildout is an "accelerated growth sector" that will benefit the entire industry.
"It's a boom," Harding toldin an interview. "In general, we have quite a bit of work in the pipeline, quite a few opportunities that we're seeing, leads and opportunities, as well as active bids right now. And they really span the entire country from the East Coast to the West Coast."
Granite shares are up 54% in the past year at roughly $139 per share and are hovering around all-time highs. Analysts polled by FactSet see shares rising as high as $167.20 and the company's third-quarter revenue increasing 25% year over year to $1.41 billion.
Harding declined to say how many projects related to data centers the company has in the works due to nondisclosure agreements.
Still, he said, Granite has been involved in about 100 such projects and adjacent endeavors in the U.S. since around 2019. The burgeoning sector now accounts for around 5% of the company's revenue.
"It's a major initiative of ours," Harding said. "We want to grow the company so we see it as, certainly, an avenue to grow the company immediately."
Marcy Nicholson
