@GavinSBaker
Post
Regret the tone of my post on data centers yesterday.
What I should have said:
There were reasonable concerns about data centers 18ish months ago: water, taxes, jobs, electricity prices, the environment and what they would do to small towns. Well-structured data center projects have largely addressed these concerns today and we should be celebrating this.
On balance, data centers are awesome for America in every way.
On water: U.S. data centers use a fraction of what golf courses use. A lot of the numbers from 18 months ago were off by over 1000x. Newer data centers use closed-loop systems or recycled water. Should be required by every town approving a data center project.
On taxes: looking only at sales-tax exemptions, as Ronan Farrow did, is the wrong way to evaluate this. Data centers pay significant property taxes. Loudoun County, which is the wealthiest county in America, now collects on the order of $1 billion a year from data centers. In Quincy, WA, data centers are more than half the property-tax roll. Over time, property taxes can go to zero while government spending increases in these towns.
On jobs: this has been unambiguously awesome for blue collar Americans. Demand for electricians, plumbers, welders, HVAC techs, and contractors has gone vertical, and it is not a one-time construction job. These buildings get upgraded and expanded over time. That is why the building trades are fighting for them, and why some unions are now treating opposition to data centers as a reason not to endorse politicians.
On power: the original fear was that households would pay for the incremental electricity demand in the form of higher prices. That is why the ratepayer-protection deals and the new large-load tariffs exist. The right structure is: the data center brings or pays for new generation and signs a contract long enough that existing customers are protected. Where that is happening, utilities are cutting or freezing residential rates and saying so on the record. Where it is not, people are right to object. Electricity prices are going down \today\ in a number of large states because of data centers. On the environment: data centers overwhelming use natural gas today, which is the cleanest power source outside of nuclear, solar and wind. And the companies that are building the data centers are committed to carbon neutrality such that an equivalent amount of solar will likely be built. Maybe more importantly, the data centers need batteries to function effectively and these batteries can also sell energy back into the grid (which recently prevented blackouts in Texas). Over time, data centers will run on solar plus batteries.
On the towns: Poverty in Quincy, WA fell from 29% to 6%. Data center taxes paid for a new high school, a hospital, a library, police and fire stations. This is happening in many left for dead former mill and farm towns that had no other bidder for the land.
Data centers are actually reindustrializing parts of America and creating the kind of working-class jobs both parties have spent decades claiming to support. That should not be a partisan issue. Data centers can and should be awesome for America and they increasingly, overwhelmingly are. Supporting the outsourcing of data centers to China will likely age just as well as support for the outsourcing of high quality, blue collar manufacturing jobs to China has aged.
When the facts change, I change my mind. I hope that reasonable people who had good faith reasons to oppose data centers at least consider updating their beliefs given the change in the facts over the last 18 months. This really matters for America.
I will say I also think the idea of making data centers beautiful is a good one that has yet to be implemented. Data centers should be just as beautiful as Grand Central Station. We can learn a lot from the railroad buildout. Neoclassical revival ftw.
Might write up open-weight AI tomorrow as this is equally essential to America.
Explanation
Gavin Baker is a technology investor and the founder/CIO of Atreides Management, with a long background investing in semiconductors and computing infrastructure. ([Atreides Management, LP][1]) His basic argument here is that the anti–data-center case made sense when the AI infrastructure boom first accelerated, but that developers, utilities, and governments have since changed the economics enough that many of those objections are now solvable engineering and contract-design problems. He is explicitly revising the tone of an earlier post, not really abandoning its conclusion: he thinks properly structured data centers are now a major net benefit to the US.
The Ronan Farrow reference is to a recent argument that communities are subsidizing AI infrastructure. Farrow highlighted Georgia giving up roughly $474 million in data-center sales taxes while directly collecting only about $41 million, plus evidence of electricity-price pressure around large data-center clusters. ([LinkedIn][2]) Baker's response is essentially: that accounting is incomplete. A state may waive sales tax on servers and construction equipment while municipalities collect enormous recurring property taxes on the buildings and especially the computing equipment. Loudoun County, Virginia—the archetypal “Data Center Alley”—received about $1.2 billion from data centers in FY2026, roughly 39% of its budget. ([Loudoun County Official Website][3]) So the real question is not “did they receive a tax exemption?” but “what is the total fiscal bargain over the facility's life?”
“Large-load tariffs” and “ratepayer protection” are the key technical idea behind his electricity argument. Traditionally, if a utility must build new generation, substations and transmission for a 500-MW customer, some costs can leak into everybody's rates. The emerging alternative is to put the data center in a special rate class, make it pay the infrastructure costs, require long-term minimum payments, and sometimes require it to procure new generation. That principle has become explicit federal policy: FERC is pushing grid operators to reform large-load tariffs, and the House recently passed a bipartisan Ratepayer Protection Act requiring states to consider cost-recovery rules for ≥100-MW data centers. ([Federal Energy Regulatory Commission][4]) This is what Baker means by saying the original objection can be designed away; he is not claiming an enormous new electrical load inherently lowers prices.
Quincy, Washington is his showcase for the small-town argument. Data centers now constitute roughly 57% of its property-tax base; its poverty rate fell from 29.4% in 2012 to 6.2% in 2024, alongside major public investment. ([Techmeme][5]) Baker uses Quincy as evidence that a capital-intensive facility with relatively few permanent employees can still transform a town because its tax base and repeated construction/upgrade work matter more than its direct headcount.
Two claims should be read as Baker's bullish extrapolation rather than settled facts. Data centers do not literally “overwhelmingly use natural gas” in any simple sense—they usually consume whatever generation is on their regional grid—and corporate carbon-neutrality commitments do not guarantee that matching solar generation appears at the same place or time. Likewise, batteries can support the grid, but only if interconnection, market rules and operating agreements permit it.
The final “reindustrialization”/China point reveals the larger thesis. Baker regards AI compute capacity—chips, power plants, electricians, cooling systems, substations, batteries—as strategic industrial infrastructure analogous to railroads or factories, not merely giant buildings hosting computers. His fear is that restricting domestic construction does not eliminate AI demand; it shifts more of the infrastructure, skilled work and strategic capacity abroad. That is also why he tees up “open-weight AI” as the next subject: for him, domestic compute capacity and broad access to AI models are two parts of the same national-capability argument.
[1]: https://atreidesmgmt.com/team/gavin-baker/?utm_source=chatgpt.com "Gavin Baker - Atreides Management, LP | Atreides Management, LP" [2]: https://www.linkedin.com/posts/ronanfarrow_datacenters-pjm-ai-activity-7498839261404672000-GpkY?utm_source=chatgpt.com "#datacenters #pjm #ai #energy #journalism | Ronan Farrow | 13 comments" [3]: https://www.loudoun.gov/6408/Data-Centers-The-Loudoun-Story?utm_source=chatgpt.com "Data Centers: The Loudoun Story | Loudoun County, VA - Official Website" [4]: https://www.ferc.gov/news-events/news/ferc-launches-aggressive-targeted-action-speed-large-load-integration?utm_source=chatgpt.com "FERC Launches Aggressive Targeted Action to Speed Large Load Integration | Federal Energy Regulatory Commission" [5]: https://www.techmeme.com/260814/p4?utm_source=chatgpt.com "Techmeme: A look at Quincy, a rural Washington farming town of 8,500 that benefited from a data center boom as its poverty rate fell from 29.4% in 2012 to 6.2% in 2024 (Nathaniel Meyersohn/CNN)"