Massive data centers lay roots in the Ninth District

Data centers have become the latest development rage. Construction spending increased to an all-time monthly high of $40 billion in June, and vacancy has reached record lows. Recent advancements in artificial intelligence have spurred this surge in development across the United States.

In the Federal Reserve’s Ninth District, a potential data center boom is just getting started. At least 25 large-scale centers have been proposed, and thousands of acres of land have been purchased for future development.

These data centers bring promises of more jobs and more investment in local economies. But the data center market is often shrouded in mystery. The scale of growth and its existing footprint in the Ninth District is hard to pin down and the impact difficult to track.

One size does not fit all data centers

Despite the recent surge in construction, data centers have existed since the dawn of computing. They are physical facilities that house IT infrastructure, whether that be a room in an office, a couple of floors in a high-rise, or a stand-alone building. The size of data centers is typically measured in the maximum amount of power they can consume, often in megawatts (MW).

There are many different categories of data centers, and their definitions vary across industry groups. Some of the most common are called enterprise data centers. These are owned by a company to support its own data needs and are typically housed on the company’s premises. They often use less than 20 MW.

As computing needs have grown, so have the underlying server centers powering this demand. Centers known as colocation facilities have grown in popularity. These are built by companies that lease space in the centers to multiple clients to support their data needs. Colocation data centers vary greatly in size and how much power they require.

However, the centers grabbing most of the attention—and power—are often called hyperscale centers. These massive, warehouse-style facilities have at least 5,000 servers and can draw over 100 MW of electricity, according to IBM.

Hyperscale facilities have been around since Google built one of the first in 2006. However, the demand for hyperscale data centers has skyrocketed with recent advancements in artificial intelligence. Since 2020, the power capacity of data centers in the U.S. has nearly tripled (see Figure 1).

Much of the demand for hyperscale centers in the U.S. comes from giant tech companies like Amazon, Google, Meta, and Microsoft, who have earned the nickname “hyperscalers.” These centers can support services like cloud computing and AI technology. Some large data centers are built by cryptocurrency companies for the purpose of crypto mining.

Hyperscalers make their way to the Upper Midwest

States across the U.S. have been vying for hyperscale data centers to bring increased investment and tax revenue. Data center development also brings temporary construction jobs and, once built, permanent IT jobs.

Major metropolitan areas that have abundant power and network connectivity have courted the most development in the United States over the last few years. Northern Virginia is currently the world’s largest existing data center market. It contains about 12 percent of global hyperscale capacity and over 150 hyperscale facilities. Development has also boomed in southern markets like Atlanta, Dallas, and Pheonix, and further north in Chicago.

In the Ninth District, development is just starting to get off the ground. As of September 2025, there were at least five operational hyperscale centers in the region. Three known locations are under construction, and about 25 more sites have been publicly proposed across the district (see Figure 2).

Accurately tracking these developments is notoriously difficult. Developers of hyperscale facilities are known to sign non-disclosure agreements with the cities where they want to build. This practice limits the amount of public information available about these projects.

New shell corporations are also commonly created to prevent the end user of the facility from being made public in the early stages of development. Meta operated through Degas LLC and Jimnist LLC for proposed developments in Minnesota and Wisconsin. A new site in Menomonie, Wisconsin, has been proposed by a company called Balloonist LLC, of which there is limited public information.

The Upper Midwest has become more attractive to some data center developers for a variety of reasons. As existing primary markets become oversaturated, land and power are more available in this region. The natural disaster risk is low and the climate is also much cooler than in places like Texas and Arizona, which means a lower cost of cooling servers.

Minnesota, with one of the largest metro areas in the district, has the most proposed hyperscale activity of the Ninth District states. There are at least 13 planned locations, mainly located around the Twin Cities. A facility being built by Meta in Rosemount, Minnesota, is the only known hyperscale facility under construction in the state.

Various factors make Minnesota particularly appealing to data center developers. The Minneapolis–St. Paul metro area has solid fiber infrastructure, a strong IT workforce, and a large number of Fortune 500 company headquarters. The state has an abundance of fresh water, which is often used to cool servers.

Minnesota was also the first state in the region to offer specific sales tax exemptions for certain data center purchases since 2011. The state recently extended some of the exemptions up to the year 2077.

North Dakota has the only known operational hyperscale facilities in the district. Similar to Minnesota, the state has a robust broadband network and implemented a data center–specific sales tax exemption in 2019. More importantly, North Dakota has an abundance of energy from a variety of resources. It produces roughly six times more energy than the energy the state consumes.

Powering the data center boom

The amount of electricity required to power hyperscale facilities is massive and expected to keep growing. In 2023, the U.S. Department of Energy found that data centers consumed about 4.4 percent of all electricity in the United States. They estimate that this may increase to more than 12 percent by 2028.

Much of the Ninth District has yet to experience this surge in power demand, as many proposed data centers are not operational. With the only operational hyperscale centers in the region, North Dakota appears to have seen some effect from these facilities, according to the U.S. Energy Information Administration. In the last four years, the state saw the largest increase in commercial electricity sales in the district (see Figure 3).

In Minnesota, Xcel Energy and Great River Energy (two of the state’s utility providers), said they will supply a combined 2,300 MW to data centers in the next seven years. That’s about the same power demand as every household in the state combined, according to The Minnesota Star Tribune.

This is not an unusual amount of power demand for hyperscale centers. In Montana, NorthWestern Energy announced its plan to provide up to 1,000 MW to one data center outside of Billings. The utility has also been in talks with other developers to supply up to 900 MW.

The impending surge in power capacity has raised concerns about the ability of power grids to meet demand. Areas with significant data center development have been found to have higher levels of power distortions than in other areas, according to an analysis by Bloomberg. While this is happening mainly around metro areas, rural areas near data centers are also impacted.

This boom may also impact the rates customers pay for electricity. In Williston, North Dakota, a hyperscale facility increased its energy capacity by over 100 MW in 2023, straining the existing transmission lines. The local utility, Montana-Dakota Utilities (MDU), claimed this led to duplicate charges on the utility from the grid operators, which were then passed on to customers.

However, in Ellendale, North Dakota, transmission-related revenue generated from a nearby hyperscale center allowed MDU to provide a credit back to ratepayers in 2023. It lowered costs by an average of nearly $6 per month, according to The Dickinson Press.

The boom also has potential to usher in more investment in renewable energy sources. The tech industry has been driving demand for green energy, with many hyperscalers having commitments to eventually power their operations with carbon-free energy. Some companies, like Amazon and Microsoft, are funding nuclear power plants in the United States.

Data boom or bust?

Given the immense energy needs and environmental concerns such as water usage and noise pollution, there has been mounting opposition to the development of hyperscale centers across the country.

In Minnesota, three separate lawsuits were filed this year against cities that have allegedly been in negotiations with data center developers. In April, a settlement was reached in a civil lawsuit against the Atlas Power Data Center in Williston, North Dakota. And the Balloonist LLC project in Menomonie, Wisconsin, was recently blocked by the city’s mayor.

Proposals before state legislatures to expand or create new regulations on data centers reflect growing concerns. While Minnesota extended tax exemptions for data center equipment purchases, the state ended its sales tax exemption on electricity purchases in 2025.

And some major hyperscale developers have signaled some hesitation this year after the last four years of rapid development. Amazon suspended its own development plans in Becker this summer. Elsewhere, Tract pulled out of a second data center site in Rosemount, according to city planning officials. Microsoft paused or completely pulled out of some projects across the U.S. in April, including a pause in construction on parts of its facility in Mount Pleasant, Wisconsin.

While data center construction continues to reach new highs across the country, the Ninth District is still in its development phase, with the future of many of these projects not set in stone.