The average cost of building a data center has surged to $475 million over the trailing 12 months, up dramatically from $177.9 million during the same period a year earlier. While some of that increase reflects the trend toward larger facilities, a significant portion is attributable to tariff-driven cost escalation across the entire supply chain.
A newly enacted 25% tariff on steel imports represents the most visible cost impact, directly increasing the price per square foot of new construction. But the effects extend well beyond structural materials. Fiber optic cables are up 5.6% year over year. Bare PCBs and printed circuit assemblies have risen by 1.5% and 2.3% respectively. And networking equipment imported from China has seen the most significant price hikes, compelling original equipment manufacturers to pass costs through to customers.
The Supreme Court Factor
Adding to the uncertainty, the U.S. Supreme Court ruled in February 2026 that portions of certain tariff actions were unlawful. In response, revised tariff measures were issued — but the practical effect has been to prolong uncertainty rather than resolve it. Data center developers now face the challenge of budgeting for projects with multi-year construction timelines against a trade policy backdrop that could shift significantly in either direction.
Near-Term Pipeline Remains Strong
Despite the cost headwinds, the near-term data center pipeline remains historically strong. Forward-looking projects in late-stage preconstruction with anticipated start dates between April and December 2026 total $63.2 billion. Year-to-date construction starts through April reached $49.5 billion, far exceeding the $13.6 billion recorded during the same period a year earlier. The demand for AI infrastructure is, for now, overwhelming the cost pressures.
However, the concentration of planned spending in the South — which accounts for well over half of the tracked pipeline — creates geographic risk. Any region-specific policy changes, grid capacity constraints, or water availability issues could redirect tens of billions in investment.