Key Takeaways
- • The $330 billion New York City pension system passed on a technology-focused private equity fund because of AI exposure concerns, according to Pensions & Investments, with CIO Monte Tarbox saying the AI boom echoes previous financial crises.
- • The $3.1 billion Jacksonville Police & Fire Pension Fund declined a new commitment to Blue Owl Capital's Digital Infrastructure Fund IV, citing political opposition, utility access, regulatory uncertainty and community resistance.
- • The $66.7 billion Arizona State Retirement System is exploring ways to reduce data center exposure, which accounts for roughly 13% of its $9.3 billion real estate portfolio and is projected to exceed 20% by end-2026.
- • A July 2026 Carbon Direct analysis identified at least 46 U.S. AI data center projects delayed or canceled after community opposition between January 2024 and May 2026, representing about $170 billion in announced investment.
- • State legislation is tightening, including California's seven data center bills, New Jersey's separate electricity rate class, Oklahoma's ratepayer protection act, and New York's proposed one-year moratorium on new hyperscale permits.
Summary
Public pension funds are beginning to reconsider their exposure to data center investments as community opposition, regulatory scrutiny and infrastructure constraints mount, according to a Private Equity Stakeholder Project (PESP) analysis. The article frames these decisions as a challenge to the assumption that AI infrastructure projects can move quickly from capital commitment to construction and revenue, and it raises questions about risk-adjusted returns and fiduciary duties.
Pensions & Investments reported that the $330 billion New York City pension systems passed on a technology-focused private equity fund because of AI exposure concerns, both in that strategy and across the city's portfolios. Chief Investment Officer Monte Tarbox said the AI boom echoes previous financial crises. The $3.1 billion Jacksonville Police & Fire Pension Fund declined to make a new commitment to Blue Owl Capital's Digital Infrastructure Fund IV, citing political opposition, utility access, regulatory uncertainty and community resistance. The $66.7 billion Arizona State Retirement System is exploring ways to reduce its increasingly concentrated data center exposure; data centers already represent about 13% of its $9.3 billion real estate portfolio, a share projected to exceed 20% by year-end 2026 as development assets are revalued.
Community opposition is increasingly translating into investment risk. In early September, Massachusetts Governor Maura Healey issued an executive order barring state agencies from issuing data center permits without prior municipal approval. In Vermont, local governments are moving to ban data center development after Governor Phil Scott vetoed stricter state regulation, and lawmakers in 16 states have discussed banning data center development. In Virginia, QTS Data Centers and Compass Datacenters abandoned the Prince William Digital Gateway after a legal challenge overturned its approval. Beltline Energy withdrew a proposed $16 billion project in Pacific, Missouri in August 2026, shortly after a one-year local moratorium, and Diode Ventures abandoned a Texas project near Cedar Creek Reservoir amid water-consumption concerns. A July 2026 Carbon Direct analysis counted at least 46 U.S. AI data center projects delayed or canceled after community opposition between January 2024 and May 2026, representing roughly $170 billion in announced investment.
State legislation is also reshaping project economics. In September 2026, California enacted seven data center bills covering electricity and water reporting, protections against shifting infrastructure costs onto ratepayers, and tighter environmental review. New Jersey created a separate electricity rate class for data centers, and Oklahoma enacted the Data Center Customer Ratepayer Protection Act of 2026. New York lawmakers passed the Responsible Data Center Development Act, which proposes a one-year moratorium on new hyperscale permits along with environmental impact assessments and separate electricity and water rate classes. Virginia approved stricter water-use reporting and backup generator emissions standards. For private equity and infrastructure investors, these changes may mean longer timelines, higher operating costs, capital tied up in projects awaiting approval, and potential stranded investments, particularly for speculative projects lacking secured power, permits or long-term tenants.
The article also highlights interconnected exposures across electricity generation, transmission, natural gas, water systems, construction and land development, which may not be visible at the individual project level. It cautions that communities and ratepayers may bear infrastructure costs if anticipated demand fails to materialize. PESP lists diligence questions for institutional investors, covering permitting status, cost allocation, the durability of tenant demand, portfolio concentration, community and environmental impacts, and downside scenarios. The article concludes that the AI infrastructure boom is far from over but that its long-term profitability assumptions are being tested.
Pensions & Investments reported that the $330 billion New York City pension systems passed on a technology-focused private equity fund because of AI exposure concerns, both in that strategy and across the city's portfolios. Chief Investment Officer Monte Tarbox said the AI boom echoes previous financial crises. The $3.1 billion Jacksonville Police & Fire Pension Fund declined to make a new commitment to Blue Owl Capital's Digital Infrastructure Fund IV, citing political opposition, utility access, regulatory uncertainty and community resistance. The $66.7 billion Arizona State Retirement System is exploring ways to reduce its increasingly concentrated data center exposure; data centers already represent about 13% of its $9.3 billion real estate portfolio, a share projected to exceed 20% by year-end 2026 as development assets are revalued.
Community opposition is increasingly translating into investment risk. In early September, Massachusetts Governor Maura Healey issued an executive order barring state agencies from issuing data center permits without prior municipal approval. In Vermont, local governments are moving to ban data center development after Governor Phil Scott vetoed stricter state regulation, and lawmakers in 16 states have discussed banning data center development. In Virginia, QTS Data Centers and Compass Datacenters abandoned the Prince William Digital Gateway after a legal challenge overturned its approval. Beltline Energy withdrew a proposed $16 billion project in Pacific, Missouri in August 2026, shortly after a one-year local moratorium, and Diode Ventures abandoned a Texas project near Cedar Creek Reservoir amid water-consumption concerns. A July 2026 Carbon Direct analysis counted at least 46 U.S. AI data center projects delayed or canceled after community opposition between January 2024 and May 2026, representing roughly $170 billion in announced investment.
State legislation is also reshaping project economics. In September 2026, California enacted seven data center bills covering electricity and water reporting, protections against shifting infrastructure costs onto ratepayers, and tighter environmental review. New Jersey created a separate electricity rate class for data centers, and Oklahoma enacted the Data Center Customer Ratepayer Protection Act of 2026. New York lawmakers passed the Responsible Data Center Development Act, which proposes a one-year moratorium on new hyperscale permits along with environmental impact assessments and separate electricity and water rate classes. Virginia approved stricter water-use reporting and backup generator emissions standards. For private equity and infrastructure investors, these changes may mean longer timelines, higher operating costs, capital tied up in projects awaiting approval, and potential stranded investments, particularly for speculative projects lacking secured power, permits or long-term tenants.
The article also highlights interconnected exposures across electricity generation, transmission, natural gas, water systems, construction and land development, which may not be visible at the individual project level. It cautions that communities and ratepayers may bear infrastructure costs if anticipated demand fails to materialize. PESP lists diligence questions for institutional investors, covering permitting status, cost allocation, the durability of tenant demand, portfolio concentration, community and environmental impacts, and downside scenarios. The article concludes that the AI infrastructure boom is far from over but that its long-term profitability assumptions are being tested.
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