The revival of the U.S. manufacturing sector is facing an unexpected competitor: a wave of artificial intelligence (AI) data centers is exerting pressure on the key areas of capital, power, and labor, jeopardizing the core policy goals of the Trump administration to rejuvenate American industry.

On October 24, Bloomberg reported that as the Trump administration promotes "manufacturing resurgence," a fierce battle for resources is intensifying behind the scenes. Tech giants are projected to invest as much as $4 trillion in AI infrastructure by 2030, creating an investment frenzy comparable to the railroad boom of the 19th century, which is rapidly siphoning capital, electricity, and labor away from traditional factories to AI data centers.

This year, spending on data center construction surged by 18%, while new factory construction shrank by 2.5%. In regions dense with data centers, wholesale electricity prices have skyrocketed by 267% in five years. Among the 439,000 construction worker shortage across the U.S., one-fifth of contractors are occupied with data center projects. Ironically, tech companies easily obtain tariff exemptions, while manufacturers face the heaviest tax burdens on equipment necessary for factory expansion since the 1990s.

The story of Lordstown, Ohio reflects the absurdity of this transformation. Trump promised in 2017 to "bring the jobs back" to this area, yet the General Motors plant still closed. Now, SoftBank has taken over the facility, not to manufacture cars, but to produce data center equipment. This former automotive manufacturing base, once employing 12,000 workers, is now being transformed by Foxconn, OpenAI, and SoftBank into a manufacturing and demonstration center for AI equipment, expected to employ only about 1,600 people.

Research firm Pantheon Macroeconomics estimates that without AI-related infrastructure spending and the wealth effect from soaring AI stocks, U.S. GDP growth in the first half of 2025 would be only 1%, instead of the actual 1.6%. Bloomberg Economics predicts that as tech giants like Google, Meta, and Microsoft increase their AI capital expenditures from nearly $400 billion this year to $600 billion next year, AI's contribution to GDP growth could rise to 1.5 percentage points next year.

MIT researcher Paul Kedrosky warns that while manufacturing struggles with tariffs, electricity prices, and labor shortages, AI enjoys policy support, capital enthusiasm, and resource allocation. The fervor for AI technology has "broken people’s mental models of how the economy operates," rendering policymakers blind to the negative impacts of their policies.

Capital Flow Discrepancy: Surge in Data Center Investment, Decline in Factory Construction The AI investment boom is causing severe distortions in capital allocation. Bloomberg Economics indicates that major players expect to invest up to $4 trillion in AI infrastructure by 2030, akin to the railroad construction boom of the 1870s and the fiber-optic network craze of the late 1990s.

This concentration of funding is evident in data. Year-to-date, spending on data center construction has increased by nearly 18%, while spending on new factory construction has fallen by 2.5%. Data from the Institute for Supply Management shows that factory activity has contracted for seven consecutive months, extending to September.

Morten Wierod, CEO of Swiss manufacturer ABB, noted that due to tariffs raising costs and labor shortages, the returns from data center projects are substantially higher for builders and suppliers compared to other projects.

ABB agreed this October to sell its industrial robot business to SoftBank Group for over $5 billion, emphasizing its focus on the more lucrative data center business.

John Engel, CEO of electrical equipment distributor Wesco International, stated:

"AI is consuming most of the oxygen in the room; that’s where the main growth lies right now. If you’re not involved in some form, then unfortunately, you’re missing out."

Electricity Struggle: Data Center Demand Drives Up Industrial Electricity Costs Electricity supply is becoming the real constraint on whether the U.S. can support both the AI revolution and the revival of manufacturing.

According to data from the International Energy Agency, a typical AI data center consumes as much electricity as 100,000 households, while the largest in-construction data centers will consume 20 times that amount. Bloomberg Industry Research estimates that by 2032, data centers could account for 20% of U.S. electricity demand.

Analysis by Bloomberg News found that in areas near data centers, wholesale electricity costs have risen as much as 267% over the past five years. This surge in electricity demand is driving up utility bills for residential and industrial customers.

The Trump administration's determination to eliminate all federal support for renewable energy further intensifies the strain on electricity supply.

To meet the massive energy demands of AI technologies, utility companies are investing in gas turbines. The spike in data center construction is also driving a surge in demand for all types of electrical equipment, with Eaton Corp. reporting a 55% year-on-year increase in orders from data center customers in the second quarter.

Labor Shortage Intensified: Construction Workers Drawn to AI Projects The U.S. has long faced a chronic shortage of skilled workers, and Trump's crackdown on illegal immigration has exacerbated this gap. According to data from the Associated Builders and Contractors (ABC), the U.S. is missing 439,000 construction workers this year.

AI infrastructure development is worsening this situation. Among ABC's 23,000 member companies, one-fifth signed contracts for data center projects in September.

John Fish, CEO of Suffolk Construction, stated that the company is building over 30 data centers across eight states and is "struggling" to find enough plumbers, HVAC contractors, mechanics, and electricians nationwide. Fish warned:

"If we don’t address this issue, the U.S. workforce will face catastrophic problems. The economy will only require more and more of these skilled technicians, and we are heading in the opposite direction."

Policy Contradictions: Tariff Exemptions Favor Tech Over Manufacturing The Trump administration's contrasting policies towards AI and traditional manufacturing are striking. Tech giants successfully secured broad tariff exemptions for imported servers and other data center hardware, while the government has been unresponsive to manufacturers' requests for waiver of import tariffs on equipment necessary for expanding or building new factories in the U.S.

In September, the Department of Commerce initiated an investigation into the import of robots and industrial machinery, potentially leading to more tariffs, further hindering manufacturing resourcing.

Estimates indicate that Trump's import tariffs represent the largest tax increase on U.S. companies since the early 1990s. Tariffs could cost Caterpillar up to $1.8 billion this year, with General Motors facing a total bill of $4.5 billion.

Barclays analyst Julian Mitchell stated in an August report that industrial recovery "looks dubious" and labeled AI as "the only game in town."

The National Association of Manufacturers openly supported the 「Big and Beautiful Act」 passed by Congress this summer, which included tax incentives to improve equipment procurement and R&D investments. However, a survey of its members revealed that nearly 80% of companies listed tariff burdens as their biggest concern. Based on these responses, the association projects capital spending to grow only 1% over the next year (not adjusted for inflation), keeping pace with recent years.

Symbolic Transformation in Lordstown: From Auto Manufacturing to AI Manufacturing The transformation of the former General Motors plant in Lordstown is a microcosm of this economic shift.

In July 2017, Trump told the public at a rally in nearby Youngstown, "Don’t sell your house," because "we’re going to bring those jobs back, fill those factories, or tear them down and build brand new ones." General Motors closed the plant less than two years later. Subsequently, a startup moved in with plans to manufacture electric cars but went bankrupt by 2023.

In August, Foxconn announced it would sell this 6.2 million-square-foot facility to a mysterious buyer for $375 million, later confirmed as SoftBank. The two companies plan to start manufacturing data center equipment at the same site where Chevrolet Impala models were once produced. SoftBank will also collaborate with OpenAI to test "advanced data center designs" at the former automotive factory site.

The project is set to commence operations in 2026, employing around 1,600 people, including the 400 already working there. For a region that has lost 40% of its manufacturing jobs over the past two decades, these job commitments are significant but fall far short of filling the gap.

Some local leaders are cautiously optimistic. Foxconn previously promised to build a $10 billion LCD factory complex in Wisconsin during Trump's first term, hailed by Trump as "the eighth wonder of the world," but it never materialized. Former Lordstown Mayor Arno Hill stated:

"They say this is the wave of the future, but will this market saturate? People will always need cars."

MIT Digital Economy Initiative researcher Paul Kedrosky is among the first scholars to contextualize the AI capital expenditure boom historically. He worries that the enthusiasm for this technology has led Trump and his advisors to overlook its negative impact on other parts of the economy. "This thing is so big that it's shattered people's mental models of how the economy operates, and as a result, they’re making mistakes," he said.