Editor’s note: This Speakout was written by Thomas Dobbs, a professor emeritus of economics at South Dakota State University.
Suddenly, it seems, the train is moving fast down the track regarding public policy decisions about “data centers” in South Dakota. As of this writing, at least two bills have been put forward: (1) Senate Bill 135, known as the “Data Center Bill of Rights”; and (2) House Bill 1125, which would “create a task force to study the impact of artificial intelligence systems on the state.” Ideas are also being floated about incentives to attract data centers to South Dakota by such means as waiver of local and state sales taxes on equipment and software purchases.
Most data centers that might come to South Dakota would presumably be utilized for artificial intelligence (AI) computer processing. Some might be used all or in part for crypto currency (CRYPTO) computing. The idea of hosting data centers for CRYPTO baffles me, as I believe CRYPTO is primarily a ‘pyramid scheme’ and/or a scheme to hide illegal transactions. In my mind, we should have learned from the conviction of Sam Bankman-Fried in 2024 for fraud, conspiracy, and money laundering with his FTX crypto currency exchange. I realize some finance people are touting a possible legal role for CRYPTO in facilitating high speed financial transactions across the globe, but I see little if any merit in that idea.
I believe there are also reasons to be concerned about data centers from the standpoint of possible adverse local or regional economic and environmental impacts. We are led to believe that safeguards can be put in place to prevent the energy demands of data centers from driving up electricity rates for residential and other business customers. However, a Nov. 1, 2025 article in The Economist magazine (“AI and electricity prices: The data center backlash is brewing”) indicates that data centers now consume 5% of America’s electricity, up from 2% 10 years ago. Data center growth has been very strong in Virginia and Georgia, but electricity rate increases there thus far do not appear to be due to this growth. In some cases, rate increases have been lower than elsewhere due to grids spreading fixed costs over more bill payers. But, the article warns that substantial rate increases may be coming. It states that recent prices at auction for future generation capacity at PJM Interconnection—the largest grid operator in the country, whose territory includes Virginia—“have soared, as data center growth has yanked up projected demand.” This article also points out a possible “nightmare scenario” where data center demand “forces grids into costly expansions but it melts away without paying off”.
This leads directly to my next concern: How stable is the AI industry itself, on which data center viability largely depends? There has been talk and writing for some months about the stability and potential viability of technology stocks, many of which are involved in AI. For example, on November 19, 2025, the American Prospect published an on-line article by David Dayen titled “The AI Bubble is bigger than you think.” The article pointed out economic danger signals, including: (1) “round-tripping”, in which AI and technology companies invest in their own customers; (2) heavy dependence on private credit; and (3) the use (sometimes) of a “special purpose vehicle” (SPV). An SPV is described in the article as follows: “A company pops up to build a data center, and they get an “anchor tenant” that’s a Big Tech firm. … It finances the data center through debt sales, implicitly (or explicitly) promising that Big Tech firm payments will pass through to investors. To be clear, I myself do not know the economic or financial structure of individual data centers now in South Dakota or proposing to come here. So I am not casting any aspersions. But in public policy — just as in personal finance — the “buyer” should always “beware” of potential financial risks.
Finally, we must also beware of potential environmental risks with data centers. Because of space limitations here, I will simply quote a Dec. 8, 2025 article in The Guardian (More than 200 environmental groups demand halt to new US data centers): “The rapid, largely unregulated rise of data centers to fuel the AI and crypto frenzy is disrupting communities across the country and threatening Americans’ economic, environmental, climate, and water security,” the groups stated to Congress.
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