Data Center Construction Spending Jumps 7.5% in August

Data center construction spending jumped another 7.5% month over month in August, extending a run that has pushed the sector up more than 73% over the past 12 months, according to Associated Builders and Contractors.

On an annualized basis, spending in the sector has grown 149% since March, ABC said.

The monthly surge anchored a broader rise in construction activity. Total construction spending increased 0.9% in August month over month to a seasonally adjusted annual rate of $2.2 trillion, according to a U.S. Census Bureau report released Thursday. Private nonresidential spending ticked up 1%, while public construction spending rose 0.2%.

"Nonresidential construction spending increased for the fifth consecutive month in August as data center investment accelerates," said Anirban Basu, ABC chief economist, in the release. "Frankly, it's becoming difficult to contextualize the size and speed of this boom."

Basu said construction spending tied to the artificial intelligence buildout has skyrocketed over the past four months.

The gains reached beyond data centers. Spending rose in 11 of the 16 nonresidential categories on a monthly basis, including manufacturing construction — the first increase in that segment since January, Basu said.

Headwinds persist

Basu cautioned that the broad improvement masks an uneven outlook. He expects momentum to stay concentrated in the data center and power categories.

"Despite this broad improvement, momentum will likely remain confined to the data center and power categories in the months to come," Basu said. "Materials and labor cost escalation have reemerged during the second half of 2026, and the recent surge in Treasury yields will continue to put upward pressure on borrowing costs."

A report from the Associated General Contractors of America echoed the warning. Association officials said the August improvement in construction spending is at risk of a reversal. The short-term federal highway funding extension that took effect Thursday does not include funding for key programs, which will lead to a drop in federal infrastructure funding.

"It is encouraging to see several construction segments stabilized or turned positive in August," said Ken Simonson, AGC chief economist. "However, all of these categories remain at risk of stagnating or shrinking as workforce shortages continue to grow, materials costs and interest rates continue to increase, and gridlock in Congress continues to undermine federal funding for highway and transit programs."

The August figures follow a July report in which data centers drove all nonresidential construction spending growth. For contractors and developers watching labor availability and interest rates, the sector's trajectory will hinge on whether AI-driven demand can keep outrunning the cost pressures now building across the industry.