New York will prohibit the construction of large data centers for up to a year while the state develops regulations to safeguard the environment and its energy infrastructure from the substantial power demands of facilities that support artificial intelligence.

Governor Kathy Hochul signed an executive order on Tuesday, imposing the first statewide moratorium in the country on hyperscale data centers—facilities that house thousands of computer servers and require substantial energy as well as a steady water supply for cooling.

This move thrusts the state into a contentious debate over how to regulate the AI industry, as concerns about rising electricity costs and environmental hazards clash with the ambition to stimulate local economies and bolster the U.S. tech sector.

"The fundamental reality is that progress should not come at the cost of higher utility bills, disrupted water supplies, or noise pollution; consequently, we have no alternative but to confront the challenges posed by these large-scale facilities," Hochul stated during a celebratory signing ceremony in Brooklyn.

President Donald Trump has cautioned states against imposing regulations on the AI industry, aligning with tech companies that contend such measures impede job growth and cede ground to China in the competition to lead this rapidly expanding field.

Earlier this year, Maine appeared on the verge of implementing a comparable moratorium.

However, the measure was vetoed by Democratic Governor Janet Mills, as it would have obstructed a proposed data center in a town that has struggled economically since the closure of a mill.

Moratoriums have been proposed in at least a dozen states but have failed to gain significant traction, although some counties and municipalities have enacted their own temporary bans.

New York’s executive order temporarily suspends state permitting for new large-scale data centres and mandates that state regulators establish standards addressing environmental impacts, energy consumption, water usage, and other relevant factors, according to the governor’s office.

Dan Diorio of the Data Center Coalition, a trade association, contended that the moratorium "will ensure that those investments, jobs, and economic activity flow elsewhere rather than to New York — with impacts far beyond the data center industry."

The decision in New York also carries political significance for Hochul's reelection campaign and the state's tight congressional races this fall, as Democrats move to address affordability concerns over high utility bills.

In addition, the governor this year softened New York's ambitious goals to reduce greenhouse gases, citing rising energy costs for consumers.

Hochul's Republican opponent in the gubernatorial race, Nassau County Executive Bruce Blakeman, opposes a statewide moratorium and argues that local governments should be allowed to negotiate agreements with tech companies for data center projects that promise sufficient economic benefits.

In a statement issued Tuesday, Blakeman asserted that the governor “doesn’t work with local governments and business leaders to figure out how to get things done,” while vowing to “modernize our economy to bring costs down and create good jobs.”

The state legislature approved its own moratorium bill this year, but Hochul's office described the legislation as complex and indicated that further refinement was necessary.

Consequently, the governor opted for an executive order that would take immediate effect.

State Senator Kristen Gonzalez, a Democrat who sponsored the legislation, was present alongside the governor during the signing ceremony.

“If Big Tech encroaches on our territory, it must do so according to our conditions,” she stated.

New York has yet to position itself as a premier hub for the largest hyperscale data centers.