The biggest AI federalism story of 2026 will not be about algorithms. It will be about silicon and steel. The National Conference of State Legislatures predicts that data centers will be a central legislative concern. While the dominant political narrative focuses on energy affordability and sustainability, the grassroots data center backlash runs deeper. People vote how they feel, and many Americans feel negatively about an AI-driven future. Data centers are vessels for AI anxiety and antipathy toward big tech more generally. This matters for two related reasons. First, the backlash reflects a broad coalition, spanning affordability, sustainability, job security, and corporate accountability. Second, even if energy costs are contained, the backlash probably will not be. For constituents anxious about AI, job loss, and cultural decay, blocking a local land-use permit or a corporate tax credit is how their voices will be heard.

None of this sits well with the Trump administration. Acceleration and deregulation are twin pillars of the White House’s domestic AI agenda. Most recently, Trump issued an executive order to limit state AI laws through a multi-pronged approach: litigation, federal funding conditions, and regulatory preemption. The order’s ambition makes it legally vulnerable. The executive branch cannot unilaterally preempt state law without a delegation from Congress. Nor can the executive branch impose spending conditions that Congress itself rejected. Agencies will be hard-pressed to demonstrate otherwise in court. Legal issues aside, the order is politically tone-deaf. By large margins, Americans favor AI regulation. States are delivering. The federal government has not. Expect more of the same in 2026.

David Rubenstein via here