Data center construction continues to stand out in an otherwise sluggish U.S. construction market, with spending on the facilities helping push private nonresidential construction higher in July.
Overall construction spending declined 0.5% in July from the previous month to a seasonally adjusted annual rate of about $2.17 trillion, according to data from the U.S. Census Bureau.
Private nonresidential construction spending increased 0.4% during the month, while public construction spending declined 0.2%.
An analysis from Associated Builders and Contractors found that the increase in nonresidential spending was driven entirely by data center construction. Without that activity, nonresidential spending would have fallen for a second consecutive month.
ABC Chief Economist Anirban Basu said nonresidential construction excluding data centers dropped to its lowest level since September 2023.
Data centers remain a major source of construction demand
The continued expansion of artificial intelligence infrastructure has created strong demand for new data centers across the country.
Those facilities are also supporting growth in related construction categories, particularly power infrastructure needed to provide the large amounts of electricity required by data center campuses.
That concentration has become an important factor for contractors. While data centers and related power projects are creating significant opportunities, a slowdown in either area could have a noticeable effect on overall nonresidential construction activity.
Basu said the industry’s positive outlook is becoming increasingly dependent on a relatively small number of sectors.
For contractors, that could make diversification more important as companies evaluate their backlogs and future project opportunities.
Infrastructure uncertainty adds pressure
The broader construction market is also facing uncertainty surrounding federal infrastructure funding.
The Infrastructure Investment and Jobs Act is scheduled to expire Sept. 30, creating concerns among contractors and industry groups about a potential interruption in federal funding for transportation projects.
Highway construction spending fell 0.2% in July from June, according to Census Bureau figures.
The Associated General Contractors of America said the weakness is especially concerning because data centers, power projects and highways are among the few areas currently supporting construction spending.
AGC Chief Economist Ken Simonson said each of those sectors faces potential challenges, including labor shortages, political opposition, tariffs and uncertainty surrounding federal transportation funding.
Contractors face an uneven market
The July figures highlight a construction market that is growing in selected areas rather than across the board.
Data center development continues to generate work for general contractors and specialty trades, while power infrastructure is benefiting from the industry’s growing energy requirements. At the same time, other types of nonresidential construction are struggling to maintain momentum.
That uneven demand could affect how contractors plan their workforces, pursue new contracts and manage risk.
For companies heavily exposed to data center construction, the current boom offers a strong pipeline. But the concentration of growth also creates vulnerability if AI-related investment slows or projects face delays.
As federal infrastructure funding decisions approach and construction costs, tariffs and labor availability remain concerns, contractors will be watching closely to see whether the data center boom can continue offsetting weakness elsewhere in the market.
