Chamath Palihapitiya calls out ‘powder keg’ data center narrative around elections

Investor Chamath Palihapitiya issued a warning in an X post on Thursday. He argued that the political finger-pointing surrounding the construction of AI data centers could lead to the loss of 200 to 300 basis points of annual US GDP if the fighting continues. 

Chamath pointed to backlash from states like Texas, Ohio, and Pennsylvania as early signs of a situation that could spread across the United States.

What did Chamath call a powder keg? 

Palihapitiya is a Silicon Valley venture capitalist and has painted the state-level fights over AI data centers as a national economic risk. In an August 20 post on X, he wrote, “This is a powder keg,” and the matter could derail the American economy if it metastasizes. 

He blamed the AI industry for “doing the basics” and went on to list a few things the sector has got wrong when it came to AI data centers. His comments come amid a slew of posts about the issue of an increase in electricity rates due to the emergence of AI data centers.  

In a back-and-forth on August 19, he stated that building expensive reactors and moving large users off the grid will spike everyone else’s electricity rates. “This is now how electricity prices work,” he wrote. 

In a previous post, Chamath has asked what nuclear plants would run if not data centers.

From supporters to skeptics in Ohio, Texas and Pennsylvania 

The warning comes as governors are withdrawing support for data centers. Politicians across the aisle are currently revolting against such projects despite courting the AI data centers for years

For example, Josh Shapiro, the Governor of Pennsylvania, previously supported the building of data centers. But just this week, he moved to remove the tax breaks and priority permitting he once offered data centers, if they do not meet newer and stricter standards. He tagged them the “strictest guardrails in the nation.” 

Governor Shapiro also berated what he called “predatory developers” looking to force local officials to do their bidding. 

The Governors of Texas and New York have taken similar steps, with Texas pausing projects and promising to rescind tax breaks worth over a billion dollars, and New York placing a one-year moratorium on large facilities

In Ohio, however, the fight seems to be tougher. As Cryptopolitan reported, Senate Republicans are warning that a loss in the midterms by Sen. Jon Husted would spell disaster for AI projects in the state. 

Meanwhile, Ohio’s gubernatorial nominees, Republican Vivek Ramaswamy and Democrat Amy Acton, have mapped out plans to toughen the rules if sworn into office.   

Rising electricity costs are driving the outrage

The outrage can be traced to the rise in household costs. Approximately one in six households in America is struggling to pay their utility bills. According to the Department of Energy, the construction of data centers would consume up to 15.3% of the country’s power supply by the year 2030.

The Energy Information Administration counted up to 250 data centers in the state of Ohio and saw that residential power has climbed by 175% since 2005, way above inflation. 7 in 10 Americans are against the construction of AI data centers close to their homes; this is based on a March 2026 Gallup survey.    

Money is flowing from both sides

Political groups from both sides of the divide are spending big. This election cycle, AI-focused super PACs have received $107 million and spent $55.5 million on federal races. 

Leading the Future has raised ~ $140 million with backing from Andreessen Horowitz and OpenAI President Greg Brockman, while Public First Action, a pro- AI regulation group, has raised $80 million, with half of that coming from Anthropic.

The larger AI industry and the White House are trying to get up to speed. President Trump admitted Wednesday that data centers “could use a little public relations help,” even though he generally expressed support for them, stating, “If I were a governor or a mayor, I would want that plant in my community.”

His ratepayer-protection pledge, which asks companies to cover their own power and grid costs, has been signed by Google, Microsoft, Meta, Oracle, xAI, OpenAI, and Amazon.