Chamath Palihapitiya says data center backlash is a ‘powder keg’ that AI leaders must defuse

Venture capitalist Chamath Palihapitiya sees AI sitting on “a powder keg.” And no, he’s not referring to a bubble, but rather the growing backlash around data centers.

Palihapitiya, co-host of the “All-In Podcast,” tore into “the collective leadership of frontier AI,” who he said have failed to convince the American people of the benefits of their industry more broadly and the advantages of data centers, in particular.

“Data centers have unfortunately become THE symbolic representation of the asymmetric upside for a very narrow tech elite and a class that are untrustworthy,” Palihapitiya wrote in a Thursday post on X.

The AI industry would be significantly hindered if companies are unable to build data centers, the sprawling facilities housing the advanced chips that train and run AI models.

“This is a powder keg and has the potential to unwind 200-300 basis points of annual GDP if it metastasizes,” Palihapitiya wrote.

The backlash isn’t likely to get better, Palihapitiya said.

“Inasmuch, the safer bet may be that the pushback and resistance grows…,” he wrote.

Palihapitiya was responding to an Axios report that Senate Republicans’ campaign arm sent a message to top AI labs, warning that data centers have become a potent issue for former Sen. Sherrod Brown as he seeks to return to Congress by ousting incumbent Sen. Jon Husted, a Republican who is running to serve out the remainder of Vice President JD Vance’s term.

In the memo, which was confirmed to Business Insider by a person familiar with its existence, National Republican Senatorial Committee said Husted and Brown “are in a dead heat” and that data centers are becoming a big problem for the incumbent. The committee warned AI companies that other politicians will take notice if Husted loses because of the issue.

“More than any other thing in this race, data centers are the anchor hanging around Husted’s neck,” the memo reads. “If he loses and data centers get the blame, politicians across the country will take notice — and they will not go near the next one.”

Palihapitiya’s message cited what he sees as other worrying developments in Texas and Pennsylvania. Both states have sought to rein in support for data centers.

Earlier this month, Texas Gov. Greg Abbott, a Republican running for reelection in November, ordered an effective pause on data center development until state agencies can audit proposed data centers seeking to connect to Texas’s electrical grid. Earlier this week, Pennsylvania Gov. Josh Shapiro, a Democrat, who is also running for reelection this November, unveiled what he called the “strictest” standards for data center development. Shapiro did not impose a moratorium, but instead empowered local officials to effectively veto data centers, pledging that the state would not overrule their wishes.

As to what the industry can do now, Palihapitiya encouraged leaders to extol more positive messages and to “stop the infighting.”

“Paint a positive picture of what is possible with AI,” he wrote. “Instead of spilling the ink on the glass half full, stories abound of pearl clutching, catastrophizing or arcane technical jargon that, together, breed mistrust, fear and skepticism.”