Data Centers in Arkansas: From Economic Promise to Public Concern and Microsoft’s New Response

Data centers have become one of the most talked-about facets of Arkansas’ economic development landscape. Once framed simply as investments that bring jobs, tax revenue, and technological prestige, the public perception is shifting, especially as neighbors begin to wonder who really pays for the infrastructure they require.

That debate is now reaching a boiling point at both the state and national levels, driven in part by the explosive growth of artificial intelligence (AI) computing that fuels the next generation of business services and digital products.

Modern AI-driven data centers draw power at a scale comparable to small cities, with an electricity demand footprint in some cases equivalent to more than 100,000 households, and they consume billions of gallons of water annually for cooling operations, according to the International Energy Agency (IEA). These trends are only expected to rise as demand grows.

These resource demands have sparked concerns about grid strain, water availability, and rising utility costs for families and small businesses, a theme that has surfaced across multiple communities nationwide.

Those concerns are not theoretical in Arkansas, where electric cooperatives, which serve much of rural and small-town Arkansas, are now fielding a surge of data-center inquiries.

Arkansas Electric Cooperative Corporation’s Economic Development Director JD Lowery told the Arkansas Reporter that cooperatives are moving deliberately and responsibly as interest accelerates.

“Electric cooperatives in Arkansas have experienced a similar level of interest in data centers as the rest of the county,” Lowery said. “The cooperatives are approaching these opportunities with strategic, long-term planning and a commitment to protecting the Arkansas electric cooperative members. While the cooperatives have seen significant interest and are actively working with data center prospects, the projects are being approached in a manner that ensures the data centers do not adversely impact rates on existing members, reliability or long-term system needs. Cooperatives exist to serve members, not to chase growth for growth’s sake. That’s why each inquiry is being approached responsibly to ensure that new developments strengthen the electric cooperative power infrastructure.”

The stakes are particularly high in Arkansas. The state is currently courting a surge of investment in data infrastructure, including a newly announced $6 billion data center project near Little Rock, intended to support cloud computing and AI operations. This would be among the largest single-project investments in state history.

Facilities of that size can require hundreds of megawatts of continuous electricity, comparable to the load of hundreds of thousands of homes. Meeting that demand often necessitates new transmission lines, substations, and power generation. In other states, consumer advocates have warned that without careful rate structures, grid expansion costs can be shifted onto residential and small-business customers.

At the same time, Arkansas has passed and updated a series of legislative measures that tilt the scales toward development:

• In 2023, HB 1654 was enacted, providing sales and use tax exemptions for data center equipment, services, and even electricity used by these facilities, a boon for industry expansion.

• In 2025, lawmakers amended and clarified those incentives further with enhanced definitions and eligibility criteria to attract large-scale facilities.

The legislature’s approach reflects a broader strategy to position Arkansas as business-friendly, but it has also drawn criticism from some local voices worried that tax waivers and incentives could come at the expense of long-term public costs. As scrutiny intensifies, some technology companies are beginning to respond.

Into this debate steps one of the nation’s largest technology firms. On January 13, 2026, Microsoft unveiled its new “Community-First AI Infrastructure” plan - a five-point commitment intended to reshape how data centers are built and operated in the United States.

Rather than relying on traditional industry conventions, Microsoft’s framework includes commitments to:

• Pay full electricity costs so local residential utility rates do not rise due to data center demand, including funding necessary grid upgrades with local power providers.

• Collaborate on and finance water infrastructure upgrades, while replenishing more water than it withdraws in local systems.

• Create local jobs through construction training and ongoing operational roles and invest in community education.

• Add to the tax base by committing to pay full property taxes and not seeking special abatements that shift costs to neighbors.

• Invest in AI training, local nonprofits, and educational partnerships that build long-term community capacity.

Microsoft’s President Brad Smith described the efforts as ensuring the gains of infrastructure growth are not outweighed by public cost. This is a signal that tech leaders are increasingly listening to local concerns.

The announcement was quickly praised by President Donald Trump, who said Americans should not “pick up the tab” for Big Tech’s power consumption and that technology companies must “pay their own way.”

Arkansas Senator Tom Cotton echoed that message, amplifying Trump’s comments and highlighting his DATA Act, which seeks to modernize how large-scale data infrastructure is powered while protecting consumers from higher energy costs.

The response reflects a growing consensus among conservatives: AI leadership is critical, but the costs should not be passed on to ratepayers.

Industry analysts say Microsoft’s framework could become a model or a pressure point for other technology firms. As public resistance to data center expansion grows nationwide, companies may increasingly face demands to justify their footprint with concrete, enforceable commitments.

Whether other firms follow Microsoft’s lead remains to be seen. What is clear is that the debate has moved beyond abstract promises of growth and into a more grounded discussion of accountability.

Arkansas is no longer testing the waters on data centers. The state is eager to attract investment, but communities are paying closer attention to how that investment affects energy prices, water resources, and local infrastructure.

As Microsoft’s initiatives raise the bar nationally, Arkansas policymakers and residents alike may begin asking a simple question of future developers: Will you pay your own way, too?