Microsoft data center rejected in Wisconsin village, AI boom hits snag

The village of Caledonia, Wisconsin, sandwiched between Chicago and Milwaukee along Lake Michigan, is dotted with corn and soybean fields, single-story homes and traffic signs alerting drivers to horseback riders.

In September, when Microsoft, the world’s third most-valuable company, sought to rezone 244 acres of agricultural land for a data center, 40 of the 49 people who spoke before the village’s planning commission opposed the plan.

They worried about noise. They said air quality, already in violation of federal standards, could worsen. They feared electric bills might inflate and that few jobs would materialize, while Microsoft would continue to reap the rewards of the artificial intelligence boom.

“Why do we have to subsidize a company making billions of dollars a year?” resident Mike Kirchner asked at the meeting.

Nine days later, before Caledonia’s top officials could vote on the proposal, Microsoft walked away. It pledged to find another location in the region, while expanding a separate AI data center 20 miles south, in the village of Mount Pleasant, where public outcry was proving to be less of an impediment.

Caledonia and Mount Pleasant both belong to Racine County, which consists of 18 small cities, towns and villages in the southeastern corner of Wisconsin.

The two villages have very different dynamics. Half a decade ago, Mount Pleasant was supposed to be home to a giant facility for Taiwanese iPhone supplier Foxconn. It was a project with such ambitions that President Donald Trump, during his first administration, called it “the eighth wonder of the world” at a 2018 groundbreaking ceremony.

To clear the way for Foxconn, Mount Pleasant bought land, offering $50,000 an acre and 140% of appraised value for residents’ homes, plus relocation costs, a village official said. Roads were paved, and water connections and electrical infrastructure installed.

But it was ultimately a high-priced failure. Foxconn eventually abandoned most of its plans, leaving a giant hole in the 800-plus acres of land that had been transferred to the manufacturer. In the eyes of many locals, Microsoft is filling that hole, and then some.

The contrasting scenarios in two Wisconsin villages, separated by mostly farmland and a smattering of churches and gas stations, underscores the obstacles facing the tech industry as it seeks to construct supersized data centers to house what’s expected to be trillions of dollars worth of AI infrastructure.

While large technology companies have maintained data centers in the U.S. for decades, there’s a fresh urgency to open facilities packed with hundreds of thousands of Nvidia chips and to cash in on the AI craze, spawned by the 2022 launch of OpenAI’s ChatGPT.

Power requirements measured in the gigawatts, pollution concerns, economic issues and political dynamics are just some of the friction points that can vary dramatically from one municipality to the next, making it virtually impossible to create a playbook for the handful of companies — Microsoft, Amazon, Google and Meta — leading the way.

Meanwhile, data centers don’t tend to create a lot of long-lasting jobs. Brad Smith, Microsoft’s vice chair and president, wrote in a blog post in September that the Mount Pleasant facility hired 3,000 construction workers at its peak and foresees 500 full-time employees, eventually growing to 800. McKinsey said in an August report that a 250,000-square-foot data center could employ 1,500 people during construction, but more than 50 for “steady-state operations,” though additional jobs get created for other labor, like upgrading infrastructure.

Local pushback can present a major hurdle.

In August, the city council in Tucson, Arizona, voted to shelve an unnamed party’s 290-acre data center proposal following objections from residents. In September, Google scrapped plans for a 470-acre site to be located in Indiana after protestors mounted signs that read “NO GOOGLE DATA CENTER,” and voiced concerns about strains on the power grid and loss of farmland.

A month later, in its quarterly earnings report, Google parent Alphabet raised its capital expenditures forecast, saying it now expects to spend up to $93 billion in 2025 followed by a “significant increase” next year. Microsoft said that same day that capex growth would accelerate in fiscal 2026, which started in July, suggesting a minimum of about $94 billion, a number that’s substantially higher when including leases.

With all of the hyperscalers laying out aggressive spending plans, Wisconsin and other states have lined up to offer incentives, such as extending tax breaks on sales of servers and networking switches. That partly…