Protests, Canceled Projects, Hidden Water Crisis: Data Center Slowdown Could Become Reality
Let’s start with the number everyone’s excited about: hyperscalers are planning to spend north of $700 billion in 2026 alone on AI infrastructure — Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL), Meta (NASDAQ: META), Microsoft (NASDAQ: MSFT), Oracle (NYSE: ORCL), are all in.1
That number is baked into every AI stock’s valuation. It assumes the buildout just keeps going, uninterrupted, forever.
Here’s the uncomfortable part: that assumption is getting harder to defend, and not because of some abstract “what if the growth slows” gut feeling. It’s getting harder because of stuff happening on the ground, right now, that most of these stock narratives are conveniently ignoring.
At this point you have to wonder whether risk management has quietly left the building on Wall Street.
Quick disclaimer before we go further: this isn’t a “sell everything” call. We are not ringing a bell; we are not telling you to short Nvidia or dump your AI portfolio. This is a risk framework, plain and simple. Understanding what could go wrong before it goes wrong. The one unforgivable sin in investing isn’t being wrong — it’s getting blindsided.
The Backlash Is Already Here: This Isn’t Hypothetical
Communities are fighting these projects, and they are actually winning some of the time. This news isn’t making the headlines.
At least 20 proposed data center projects were canceled after local pushback in just the first three months of 2026, representing more than $41.7 billion in scrapped investment. 2
Separately, Data Center Watch has tracked roughly $64 billion in data center projects blocked or delayed nationwide amid organized local opposition, with 142 advocacy groups actively working to slow or stop new builds across 28 states. 3
What makes this notable isn’t just the dollar figure. It’s who’s protesting. This is one of the rare genuinely bipartisan fights in American politics right now: Republicans and Democrats both showing up at the same townhalls.
In Utah for example, hundreds of protesters showed up to a county commission meeting over a proposed 9-gigawatt data center project, chanting “we want water.”4
In New Jersey, organized local pushback got entire townships to pass outright data center bans.5
None of this alone stops the buildout. But it adds friction, delay, and cost — three things Wall Street’s $700 billion capex models aren’t really accounting for right now.
Mind you: these protests aren’t limited to U.S., Canada is seeing its own set of pushback against data centres.
The Water Story Nobody Wanted You to See
Then there’s the Wall Street Journal investigation that dropped recently, and it’s a genuinely bad look.
The gist: tech giants’ sustainability reports only disclose the water used directly on-site for cooling, but that’s the small part of the story. The much bigger water footprint sits upstream at the power plants generating the electricity these data centers run on, and that number is largely left out of the disclosures entirely. 6
Researchers at Lawrence Berkeley National Laboratory estimate that for U.S. data centers, this indirect water use has historically run about 12 times greater than direct on-site cooling, and total data center water consumption could climb from roughly 228 billion gallons in 2023 to somewhere between 469 and 844 billion gallons by 2028. 7
Simple math here: this represents growth of roughly 106% over five years.
Of the major hyperscalers, only Meta (NASDAQ: META) currently discloses both direct and indirect water use. Microsoft (NASDAQ: MSFT), Alphabet (NASDAQ: GOOGL), and Amazon (NASDAQ: AMZN) largely report on-site cooling numbers only.
This matters for the stock story because “water availability,” is now one of the top two or three reasons cited by protesters and local officials trying to block or delay new projects. 8
A transparency problem plus a genuine resource-scarcity problem, in the driest parts of the country, is not a great combination if you’re trying to permit a 9-gigawatt facility next door to someone’s farm.
So Where Does That Leave the “10% Slowdown” Scenario?
Put the protests and the water disclosures together, and a 10% pullback in data center growth stops looking like a random hypothetical and starts looking like a plausible outcome of forces that are already in motion.
A 10% slowdown isn’t a crash. It’s just enough friction, from enough directions, to slow the line down.
Fact: if that happens, it doesn’t kill AI.
It kills the specific “just throw more GPUs and more gigawatts at it” era we’ve gotten used to. This could push everyone towards smaller, more efficient models and even edge computing. This could be because the free lunch of unlimited infrastructure growth stops being free.
Nvidia (NASDAQ: NVDA): Less Room to Fall Than It Looks, But Still Exposed
Nvidia stock has already been getting whipsawed by capex-fear headlines all year without an actual slowdown even happening.
NVDA stock slid on OpenAI-related jitters in April,
Dropped a bit in March on customer-concentration worries despite a record earnings beat. 9
Its multiple has already compressed to roughly 24x forward earnings, barely above the S&P 500. Surprisingly and historically cheap for this stock.
That said, a real slowdown, not just a headline scare, plausibly takes another -15% to -25% out of the valuation, because immediate revenue revisions and inventory concerns don’t stay theoretical for long.
Jensen Huang’s counterargument that Nvidia can outgrow hyperscale capex itself by picking up share elsewhere. It is worth knowing, but it’s a bet on execution, not a guarantee. And no CEO badmouths their own company when the stock is flying.
Private AI Labs: The Least Protected Layer
OpenAI’s most recent round valued the company at $852 billion on roughly $11.6 billion in annualized revenue. This is a ~73x revenue multiple against 15-25x for the most richly valued public tech names. 10
There’s no ticker here because it’s still private, and that’s precisely the risk. No public market discipline, no earnings calls forcing quarterly reality checks. A slowdown scenario plausibly means -20% to -40% off private valuations.
The early cracks are already visible: Sequoia has reportedly raised its internal valuation bar for AI application companies, and smaller labs like Reka and AI21 have seen check sizes shrink as capital concentrates into the top three players. 11
Hyperscalers: Painful First, Not Necessarily Fine Later
Microsoft (NASDAQ: MSFT), Alphabet (NASDAQ: GOOGL), and Amazon (NASDAQ: AMZN) would likely take a 5-10% knee-jerk hit first.
UBS has floated the idea that moderating capex growth could eventually improve investor perception of the spenders, even as it hurts the “enabling layer” underneath. But that’s a best-case read. It assumes the slowdown is orderly and self-chosen.
Given how much of the current pressure is coming from outside these companies’ control — protests, permitting fights, disclosure scandals — “orderly” isn’t guaranteed.
Software: A Relief Rally, Not a Rescue
The one genuinely counterintuitive bright spot: enterprise software hasn’t been getting hurt by hardware fear this year, it’s been getting hurt by AI succeeding too fast.
Roughly $2 trillion in SaaS market cap evaporated in early 2026 as agentic AI tools threatened per-seat pricing models.
A slowdown in the pace of frontier AI releases could take some heat off names like Salesforce (NYSE: CRM), Adobe (NASDAQ: ADBE), and ServiceNow (NYSE: NOW). But call it what it is: a pause in the panic, not proof the disruption threat is gone.
The Bottom Line
Put it all together and the honest read is: the AI infrastructure buildout has more real-world friction underneath it right now than the headline capex numbers suggest.
Protests are blocking billions in projects.
A major water-use disclosure gap is now public and ugly.
None of that guarantees a slowdown, but it makes the “growth only goes up” assumption look shakier than it did a few months ago.
Once again, this isn’t a call to sell your NVDA stock, short the hyperscalers, or bail on software stocks. It’s a reminder that the risks to the AI capex story aren’t just theoretical anymore. They are showing up in county commission meetings and sustainability reports.
One more thing: the names mentioned here are just the headline-grabbers, the ones everyone already knows. If this scenario actually plays out, they won’t be the only ones who feel it — there’ll be plenty of collateral damage nobody’s talking about yet. So, know what you own, know why you own it, and know exactly what would have to happen for that thesis to break.
At Zulfiqar Research, our goal is to figure where the trade could be rather than where it is now.
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Sources:
1. Futurum Group, “AI Capex 2026: The $690B Infrastructure Sprint”
2. Heatmap News, “Exclusive: Local Opposition to Data Centers Explodes in 2026”
3. Data Center Watch, “$64 Billion of Data Center Projects Blocked or Delayed”
4. The Spectator, “How Anti-Data Center Activists Are Taking On Big Tech — and Winning”
5. Salon, “AI Data Centers Are Taking Over. These Americans Are Fighting Back”
6. WhatJobs News, “AI Data Centers Use Far More Water Than Most Tech Giants Report” (reporting on a Wall Street Journal investigation)
7. Trefis, “Why NVIDIA Stock May Drop Soon”
8. Quartz, “Nvidia Stock Is Stuck in a Rut Despite AI Spending Blitz”
9. CNBC, “Here We Go Again With Nvidia Falling on Earnings”
10. Tech Insider, “OpenAI’s $122B Raise at $852B Valuation” 11. Forbes, “$300 Billion Evaporated. The SaaS-Pocalypse Has Begun.”