A new data center industry report from law firm Foley & Lardner LLP is signaling a potential inflection point for the U.S. data center market, as the rapid expansion driven by artificial intelligence collides with mounting concerns over power availability, permitting delays, and long-term sustainability.
The law firm’s latest data center development report titled ‘Data Center Outlook 2026: AI Demand, Energy, and Growth’ examines how the AI boom is reshaping infrastructure investment across the United States and asks whether the pace of development fueling that growth can realistically be maintained.
The report, based on surveys and interviews with U.S.-based executives and experts across the data center ecosystem, arrives at a moment when data centers have become a cornerstone of economic growth, supporting everything from cloud services and AI model training to enterprise digital transformation. At the same time, it highlights growing anxiety among industry stakeholders about bottlenecks that could slow or reshape the market before the end of the decade.
AI Driving Infrastructure Pressure
According to Foley’s findings, nearly two-thirds of respondents expect a strategic correction in the data center market by 2030, while close to 40 percent believe the current pace of development is unsustainable. Much of that concern centers on power. As AI workloads demand ever-greater compute density, securing reliable electricity at scale has become a defining challenge for developers and operators.
Daniel Farris, partner and co-lead of Foley’s Data Center and Digital Infrastructure Team, describes the current environment as a “Gold Rush mentality” around power procurement. In his view, competition for energy capacity is intensifying to the point where availability at the necessary scale may become increasingly scarce over the next two to three years, reinforcing fears of overbuild in certain markets.
Despite those concerns, optimism remains high about the industry’s long-term ability to deliver. An overwhelming 95 percent of respondents believe that rising compute demand will ultimately be met by the end of the decade. That confidence, however, is being tested by structural constraints that extend beyond power alone.
Energy availability and redundancy were cited by 54 percent of respondents as the single greatest obstacle to successful data center development through 2030. Other challenges vary sharply by stakeholder group. Developers point to permitting and regulatory hurdles, with 53 percent identifying them as a major barrier. Providers highlight supply chain disruptions, cited by 65 percent, while operators are increasingly concerned about construction costs, flagged by half of respondents.
Water availability, often a sensitive topic in public debates around data centers, currently ranks lower on the list, with only 10 percent viewing it as an immediate obstacle. However, concern rises significantly over time, with one quarter of respondents expecting water use restrictions to become a meaningful challenge by 2030.
Regulatory Misalignment Stalls Data Center Deals
Beyond infrastructure constraints, the report also sheds light on where deals most often stall. Nearly half of respondents say regulatory and permitting stages are where projects are most likely to break down, often due to insufficient coordination among stakeholders. This lack of alignment, the report suggests, could slow deployments even as demand continues to rise.
Looking ahead, respondents identified technological progress as both a necessity and an opportunity. Advances in energy efficiency and cooling technology were named as the two most significant opportunities for data center development over the next several years. When asked about the ideal future energy mix, a majority favored renewables combined with battery storage, supplemented by natural gas, nuclear power, and other low-carbon sources such as geothermal energy and blue hydrogen.
Rachel Conrad, senior counsel and co-lead of Foley’s Data Center and Digital Infrastructure Team, argues that the next decade will reward innovation. Power providers, she notes, will need to either expand capacity or dramatically improve efficiency to keep pace with AI-driven demand, and those that succeed stand to gain a competitive edge.
The report is based on a quantitative survey of 105 U.S.-based professionals conducted in October 2025, alongside in-depth interviews with investors, financiers, tenants, and hyperscalers. Together, the findings paint a picture of an industry still bullish on AI’s potential, but increasingly aware that growth will depend as much on collaboration, regulation, and energy strategy as on capital investment.
Executive Insights FAQ
What is the focus of Foley’s 2026 Data Center Development Report?
It analyzes how the AI boom is driving data center growth in the U.S. and evaluates the sustainability of that expansion.
Do industry leaders expect a market correction?
Yes, 63 percent of respondents anticipate a strategic correction in the data center market by 2030.
What is the biggest challenge facing data center development?
Energy availability and redundancy are seen as the top obstacle through the end of the decade.
Is the industry confident it can meet AI-driven demand?
Despite challenges, 95 percent of respondents believe compute demand will be met by 2030.
Which technologies offer the greatest opportunity?
Energy efficiency improvements and advanced cooling technologies are viewed as the most promising opportunities.
