The village of Caledonia, Wisconsin, sandwiched between Chicago and Milwaukee along Lake Michigan, is dotted with corn and soybean fields, single-story homes and traffic signs alerting drivers to horseback riders.

In September, when Microsoft, the world’s third most-valuable company, sought to rezone 244 acres of agricultural land for a data center, 40 of the 49 people who spoke before the village’s planning commission opposed the plan.

They worried about noise. They said air quality, already in violation of federal standards, could worsen. They feared electric bills might inflate and that few jobs would materialize, while Microsoft would continue to reap the rewards of the artificial intelligence boom.

“Why do we have to subsidize a company making billions of dollars a year?” resident Mike Kirchner asked at the meeting.

Nine days later, before Caledonia’s top officials could vote on the proposal, Microsoft walked away. It pledged to find another location in the region, while expanding a separate AI data center 20 miles south, in the village of Mount Pleasant, where public outcry was proving to be less of an impediment.

Caledonia and Mount Pleasant both belong to Racine County, which consists of 18 small cities, towns and villages in the southeastern corner of Wisconsin.

The two villages have very different dynamics. Half a decade ago, Mount Pleasant was supposed to be home to a giant facility for Taiwanese iPhone supplier Foxconn. It was a project with such ambitions that President Donald Trump, during his first administration, called it “the eighth wonder of the world” at a 2018 groundbreaking ceremony.

To clear the way for Foxconn, Mount Pleasant bought land, offering $50,000 an acre and 140% of appraised value for residents’ homes, plus relocation costs, a village official said. Roads were paved, and water connections and electrical infrastructure installed.

But it was ultimately a high-priced failure. Foxconn eventually abandoned most of its plans, leaving a giant hole in the 800-plus acres of land that had been transferred to the manufacturer. In the eyes of many locals, Microsoft is filling that hole, and then some.

The contrasting scenarios in two Wisconsin villages, separated by mostly farmland and a smattering of churches and gas stations, underscores the obstacles facing the tech industry as it seeks to construct supersized data centers to house what’s expected to be trillions of dollars worth of AI infrastructure.

While large technology companies have maintained data centers in the U.S. for decades, there’s a fresh urgency to open facilities packed with hundreds of thousands of Nvidia chips and to cash in on the AI craze, spawned by the 2022 launch of OpenAI’s ChatGPT.

Power requirements measured in the gigawatts, pollution concerns, economic issues and political dynamics are just some of the friction points that can vary dramatically from one municipality to the next, making it virtually impossible to create a playbook for the handful of companies — Microsoft, Amazon, Google and Meta — leading the way.

Meanwhile, data centers don’t tend to create a lot of long-lasting jobs. Brad Smith, Microsoft’s vice chair and president, wrote in a blog post in September that the Mount Pleasant facility hired 3,000 construction workers at its peak and foresees 500 full-time employees, eventually growing to 800. McKinsey said in an August report that a 250,000-square-foot data center could employ 1,500 people during construction, but more than 50 for “steady-state operations,” though additional jobs get created for other labor, like upgrading infrastructure.

Local pushback can present a major hurdle.

In August, the city council in Tucson, Arizona, voted to shelve an unnamed party’s 290-acre data center proposal following objections from residents. In September, Google scrapped plans for a 470-acre site to be located in Indiana after protestors mounted signs that read “NO GOOGLE DATA CENTER,” and voiced concerns about strains on the power grid and loss of farmland.

A month later, in its quarterly earnings report, Google parent Alphabet raised its capital expenditures forecast, saying it now expects to spend up to $93 billion in 2025 followed by a “significant increase” next year. Microsoft said that same day that capex growth would accelerate in fiscal 2026, which started in July, suggesting a minimum of about $94 billion, a number that’s substantially higher when including leases.

With all of the hyperscalers are laying out aggressive spending plans, Wisconsin and other states have lined up to offer incentives, such as extending tax breaks on sales of servers and networking switches. That partly reflects an effort to reestablish domestic industries after decades of economic erosion from the closing of factories and the rise of offshoring.

Wisconsin, once a hub for building auto parts and heavy equipment, has 22% fewer people working in manufacturing today than it did at the end of the 20th century, according to the Bureau of Labor Statistics. In 2010, Chrysler closed its plant in Kenosha, just south of Caledonia.

A data center doesn’t promise the kind of jobs needed for a vehicle production line, but it represents a connection to an emerging part of the economy and can offer hope to areas that have long been on the decline.

“The jobs Microsoft is paying are notably higher than the average wage in the region,” said Dale Kooyenga, CEO of the Metropolitan Milwaukee Association of Commerce.

It’s a pitch that was enticing enough for one village in Racine County, but not another.

The story starts in 2017, when Foxconn said it would build a $10 billion plant in Mount Pleasant for making flat-panel displays, with plans to create 13,000 jobs.

Mount Pleasant and Racine County told media outlets they were committing $764 million. Kelly Gallaher, Racine County’s Democratic party chair, said borrowings approached $1 billion.

“For a town of 26,000 people, that’s crazy, right?” she said in an interview.

By mid-2018, Foxconn was already scaling back its plans, first by deciding not to proceed with a “Generation 10.5” factory that could churn out screens of up to 75 inches in size, and instead targeting smaller components.

The company quickly downsized its hiring projections. Development was so slow that Bloomberg described the project as “disastrous” in 2019.

An amended contract signed in 2021 allowed for up to $80 million in state tax credits, down from the original $2.85 billion, in the event that Foxconn reached its new job creation goal of 1,454 by 2026. In 2023, the company said, it employed over 1,000 people in Wisconsin.

Mount Pleasant’s finances sagged under the pressure of the development. Between 2019 and 2022, the village lost $193 million to pay down debt for the project, as costs far outpaced tax revenue from Foxconn, according to financial reports. And the city of Racine, which supplies water to the village, wasn’t getting much economic activity in return, leading to a legal skirmish between the municipalities.

Then came the AI blitz.

OpenAI released ChatGPT in November 2022. The chatbot took off immediately and set in motion a torrent of investment in generative AI. Microsoft, OpenAI’s lead backer and dealer of computing power, needed more capacity.

In addition to enlisting third-party providers like CoreWeave, Microsoft sought out land. The company found Mount Pleasant, and in 2023 revealed plans for a 315-acre campus.

In May 2024, President Joe Biden visited Wisconsin to promote the home of the planned $3.3 billion data center. Microsoft’s Smith, who spent some of his childhood in Mount Pleasant, said the facility would create manufacturing jobs around the state.

And while it wouldn’t bring 13,000 jobs, as Foxconn had promised, Smith said, “We will train over 100,000 people in Wisconsin by the end of the decade so they have the AI skills to fill the jobs of tomorrow.”

Microsoft’s arrival was “kind of a bit of a silver lining in what was basically a shameful story,” Gallaher said.

In 2023, Gallaher had mounted a campaign to try and unseat Dave DeGroot as Mount Pleasant village board president, blaming incumbents for the Foxconn misadventure. But in the election that April, a week after Microsoft’s announcement, DeGroot was victorious. He didn’t respond to a request for comment.

While Microsoft’s plans received a hefty dose of local support from residents fed up with the Foxconn fallout, environmentalists have been vocal.

A nonprofit called Midwest Environmental Advocates sued the city of Racine in September for information on water use, a month after conservation group Alliance for the Great Lakes published a report showing that “a single hyperscale data center can use more than 365 million gallons of water a year, equivalent to what 12,000 Americans use in that time.”

The city responded that Microsoft’s facility would use up to 8.4 million gallons per year.

In February, residents of neighboring Kenosha County protested plans for a natural gas plant in the town of Paris, six miles from the Microsoft site, saying air quality would worsen and bring health problems.

“Hope this doesn’t become some sort of an AI hub,” Jonathan Barker, one of the protesters, said in an interview. Barker is a former pastor of Kenosha’s Grace Lutheran Church, a 20-minute drive from the Paris plant. He said rate increases from We Energies, which provides electricity to over 1 million Wisconsin customers, could be overwhelming to those on fixed incomes.

Smith has tried to reassure locals. At a September town hall meeting in Racine, he stressed that Microsoft wasn’t about to drain Lake Michigan. He promised citizens that their electric bills won’t spike because of the company’s presence.

If anything, residents should prepare to see the project expand, Smith said in an interview from a balcony at the data center, which will house two stories of AI chips.

“We bought a lot more land than one would need if the only thing we can build is two of these,” Smith said.

The company paid $1.9 million in property taxes to Mount Pleasant in 2025, with a larger sum to follow in 2026, as its first data center comes online. The second is set to open by 2028.

Microsoft plotted out land just west of We Energies’ 610-megawatt Oak Creek coal plant, which opened beside Lake Michigan in the 1950s. We Energies buried coal ash around the plant, and in 2009 it reported elevated levels of the chemical element molybdenum in nearby private wells. The utility bought over 100 acres to form a buffer around the plant.

In July, Caledonia sent letters to those in close proximity to the property that Microsoft was pursuing, though without mentioning the company’s name, about a potential rezoning. Prescott Balch, a retired U.S. Bank technology executive living in Caledonia, estimated that roughly 100 homes sit within a mile of the site. The difference in Mount Pleasant is that the nearby homes had been cleared years earlier to make way for Foxconn.

Along with the letters, Caledonia scheduled a planning commission meeting to discuss rezoning that would allow for “future development of high-quality, low-traffic light industrial development, i.e., data center.”

Valerie Lancelle never received a letter. She learned about the issue from signs she noticed while driving to the gym one morning in July. The signs were from the village. “Zoning Change Requested,” they stated.

Lancelle, a 20-year veteran of U.S. Bank and a Caledonia resident, turned to community Facebook groups.

“I’m like, ‘Hey, does anybody know about this? What’s going on? This is a problem. I’m a little worried,'” she recalled. She reconnected with Balch, whom she’d worked with until his retirement in 2023.

Lancelle attended the planning commission meeting in late July. All 21 people who spoke up were opposed to the development or had questions, according to minutes from the session.

The next day, residents launched a Facebook group called “Caledonia Residents against rezoning on Botting Road.” It grew to encompass hundreds of members.

When CNBC visited Wisconsin in September to see the Mount Pleasant data center, tension was palpable in Caledonia. A lawn sign read “DATA CENTER” inside a red circle with a line through it. A man living on the property declined to give his name but said he wouldn’t want a data center using water designated for the village.

At the time, Microsoft’s involvement hadn’t been made public. The proposal was just called Project Nova.

“People had been asking me who it was, and I was saying, ‘I don’t think it’s Microsoft,’ because I believe that when they went to Mount Pleasant, it was openly Microsoft right from the outset,” said Fran Martin, a Caledonia trustee. “I thought it was unlikely that it was Microsoft, because why would they be so open in that situation, and not simply, you know, come to Caledonia with the same openness or transparency? I still don’t understand it.”

Microsoft went public with its plans on Sept. 23, at a village board meeting. The Racine County Economic Development Corporation and an engineering firm gave presentations on Project Nova. A director for the economic development group said Microsoft was looking at 50 to 200 permanent Caledonia jobs.

Diann Strom, a Microsoft regional manager based in the company’s home state of Washington, showed a slide titled “Microsoft data centers in your community,” followed by 11 slides detailing how the company professes to foster prosperity and act as a “good neighbor” when it arrives in a new location. Strom said Microsoft intended to pay its own way for electricity.

“Our water demands are modest compared to other large industrial water users,” she told attendees.

Despite the assurances, 32 out of 34 people spoke against Microsoft’s plans.

The next day, Microsoft held an information session at Caledonia Village Hall. Five days later, the planning commission convened at the same place to vote on whether to recommend the rezoning. The crowd spilled out into the lobby, Lancelle said.

Some speakers expressed concerns about the potential environmental impact. Others worried about finances, the risk of relying too heavily on one taxpayer and how the data center buildings could be used if Microsoft were to abandon them.

Balch, who said he spent much of his career building software for data centers, had prepared many of the attendees’ talking points.

“This is strange bedfellows for me, politically,” he said. “I’m the last person that you would expect to be opposed to a data center.”

Caledonia favored Trump in the 2024 presidential election. Balch, who calls himself fiercely independent, said he figured that his best shot at persuading the village board was to advance economic arguments, rather than concentrate on the environment.

He did have personal concerns.

“Horses are skittish animals,” he said. “They’re run-first, ask-questions-later animals. They would have had a miserable experience. I would have even contemplated moving because their lives would have been just unpleasant, given how fearful they are of strange noises and sounds and sights.”

At the hearing, Balch advised planning commissioners to pause.

“The property and AI demand will still be there when the plan is ready,” he told them. “And Microsoft isn’t anywhere near ready to build anyway.”

Martin took her turn at the mic and slammed officials for a lack of transparency.

“When you’re asking us to make a decision as momentous as this and you don’t choose to involve us in the process at all, I find that difficult,” she said. In fact, Microsoft said it reached out directly to Caledonia village staff members in August and subsequently met with them weekly.

Despite the pressure, Microsoft managed to win rezoning support from five of the village’s seven planning commissioners. The company’s employees then checked in with trustees of the village board. The sentiment wasn’t all favorable.

“They may have walked out of there going, ‘Do we want to take the chance of being voted down?'” said one trustee, Nancy Pierce.

Microsoft pulled out the next week, before the matter came before the village board.

In a statement to The Milwaukee Journal Sentinel, Microsoft said, “Based on the community feedback we heard, we have chosen not to move forward with this site.”

Balch said he, Martin and Pierce shared hugs and high fives at a park.

“We did seem to have awoken a sleeping giant, I guess,” Martin said.

Bowen Wallace, Microsoft’s corporate vice president of data centers in the Americas region, said in a statement that the company is “committed to being a good neighbor in the communities where we operate.”

Microsoft understands “the importance of hearing and responding to local concerns, and will use the learnings from our experience in Caledonia moving forward,” Wallace said.

Andrew Chien, a computer science professor at the University of Chicago and a former Intel research executive, said “structural” challenges are apparent in many places where tech companies try to build.

Most of the jobs are temporary, while resource needs and environmental impact will go on for many years, so companies must find ways to be part of the community, protecting residents from rising utility prices and offering job retraining programs, Chien said. That’s very different from how the tech industry is used to operating, he added.

“Traditional Silicon Valley culture is, go fast and scale without regard to human communities,” he said. “That has to change. Long-term win-wins need to be constructed.”

Last year in Beaver Dam, a small city northwest of Milwaukee, the Common Council signed an agreement backing the annexing and rezoning of an 830-acre site. The project was codenamed Degas LLC.

Only later did the council say it was the site of a possible data center. Anger spread on Facebook. Earlier this month, about 100 people showed up at a council meeting, where attendees each had two minutes to lodge complaints.

“You should all be ashamed of yourselves,” one person called out.

Crews have already broken ground, leaving rocks and rubble in the road for vehicles to dodge, said Joey Larson, a midwife in Beaver Dam who joined the meeting virtually.

“Honestly, if we knew that this was going here, we never would have bought here,” she said.

Earlier this month Meta published a blog post outing itself as the company behind Degas LLC, confirming locals’ suspicions. The company promised over 100 “operational jobs.”

Outside Madison, Blackstone-owned developer QTS Realty Trust is aiming to build a data center in the village of DeForest. QTS wants to buy land in the nearby town of Vienna. DeForest received a petition to annex 1,135 acres from Vienna, but Vienna’s town board voted 4-0 to reject a cooperation agreement with the developer, after 22 people spoke in opposition to the arrangement.

Shawn Haney, a former sheriff’s lieutenant in Vienna, said locals are worried about energy and water consumption, and whether it’s “going to be like the dot-com bubble of years ago.”

In October, the lakeside city of Port Washington, 26 miles north of Milwaukee, was identified as a site for OpenAI and Oracle as part of their Stargate effort. Over 1,000 opponents signed a petition to have the city obtain voter approval before entering into tax deals worth more than $10 million. A joint review board went ahead with a deal anyway.

“This just did not receive any sort of substantial input from the community,” said Christine Le Jeune, a PhD student at the University of Florida who lives in Port Washington.

In flyers distributed to city households, data center firm Vantage promised 330 full-time jobs after construction. The company said electric bills wouldn’t go up for the site, which would rely on renewable sources for 70% of its energy needs.

On Nov. 10, the city of Janesville, two counties west of Racine, said it would conduct due diligence on a proposal to redevelop the grounds of a former General Motors plant for an $8 billion data center that would consume up to 800 megawatts of power.

Unhappy locals are aiming to collect signatures from 4,000 homeowners and renters in the city of about 66,000 to require a referendum for any structure at the old plant that would cost over $450 million.

And what’s next for Microsoft? Even after the failure at Caledonia, the company said it wanted to keep working with the village and Racine County officials as it selects a new location.

At its information session, Microsoft had displayed posters for the public to examine. One listed the steps the company takes before turning on a data center, including construction. Cast in bold at the bottom were the words, “It’s a marathon, not a sprint.”

An election in April 2026 could change the composition of the village board, opening up the possibility of a new Microsoft proposal. Balch said he plans to run for a board seat.

“We never were hellbent on no data center anywhere, and we won’t be if they pick another location,” Balch said. “But the devil’s in the details.”

— CNBC’s Ari Levy contributed to this report.

WATCH: Amazon’s $11B data center goes live: Here’s an inside look

This is CNBC’s Morning Squawk newsletter. Subscribe here to receive future editions in your inbox.

Here are five key things investors need to know to start the trading day:

Senior U.S. District Judge Cameron Currie threw out criminal cases against former FBI Director James Comey and New York Attorney General Letitia James yesterday.

Currie said Lindsey Halligan, the interim U.S. attorney who led the indictments, was invalidly appointed. Both cases were dismissed “without prejudice,” meaning the charges could be filed again.

The rulings mark a loss for President Donald Trump, who pressured Attorney General Pam Bondi to take action against his political foes. White House spokeswoman Abigail Jackson told CNBC that “this will not be the final word on this matter.”

Amazon became the latest tech company to throw eye-popping sums behind AI buildout initiatives. The e-commerce giant said it will invest as much as $50 billion to expand its capacity to provide AI and high-performance computing capabilities for its cloud unit’s U.S. government customers.

The project is expected to begin in 2026 and will add close to 1.3 gigawatts of capacity. With the investment, government clients will also have access to Anthropic’s Claude models and Nvidia chips, in addition to Amazon hardware and software.

Also yesterday, Amazon said it will let businesses test its internet-from-space service, which was recently renamed Leo from Project Kuiper. As CNBC’s Annie Palmer notes, the product competes with SpaceX’s Starlink.

CNBC Sport is out this morning with its new NHL team valuations for 2025. The average franchise has seen its value rise 15% to $2.2 billion, driven by pricier media rights deals.

The Toronto Maple Leafs remained at the front of the pack with a valuation of $4.3 billion, up 8% from last year. The New York Rangers is the runner-up, rising by 9% year over year to $3.8 billion.

Microsoft faced vocal community opposition to a data center plan in Caledonia, Wisconsin, leading the tech giant to scrap its plans and look elsewhere. CNBC’s Jordan Novet broke down the local reaction.

— CNBC’s Gabrielle Fonrouge, Sean Conlon, Pia Singh, Dan Mangan, Kevin Breuninger, Annie Palmer, Yun Li, Michael Ozian and Jordan Novet contributed to this report. Terri Cullen edited this edition.

Alibaba delivered better than expected revenue in its fiscal second quarter as sales in its key cloud computing division accelerated.

Alibaba’s New York-listed shares were around 4.3% higher in premarket trade as investors looked past a plunge in profitability.

Here’s how the company did in its fiscal second quarter ended Sept. 30 versus LSEG estimates:

• Revenue rose 5% to 247.8 billion Chinese yuan ($34.8 billion) versus 242.65 billion yuan the previous year.

Investors are focused on Alibaba’s cloud computing division which books its revenue related to artificial intelligence. Over the past few quarters, Alibaba’s cloud revenue growth has accelerated.

Alibaba reported a 34% year-on-year rise in cloud computing revenue to 39.8 billion yuan versus expectations of 37.9 billion yuan. That growth rate was faster than the 26% notched in the June quarter.

The Chinese tech giant said its investments in AI were helping its cloud unit.

“Robust AI demand further accelerated our Cloud Intelligence Group business, with revenue up 34% and AI-related product revenue achieving triple-digit year-over-year growth for the ninth consecutive quarter,” CEO Eddie Wu said in an earnings statement on Tuesday.

In September, the company said it plans to increase spending on AI models and infrastructure development, on top of the 380 billion yuan ($53 billion) over three years it announced in February. Alibaba said on Tuesday it has spent around 120 billion yuan in capital expenditure toward AI and cloud infrastructure over the past four quarters.

Earnings before interest, taxes, and amortization (EBITA), a measure of profitability, increased by 35% to 3.6 billion yuan for its cloud division.

Alibaba has emerged as one of China’s leading AI players. On Monday, Alibaba said its Qwen app, the Chinese giant’s rival to OpenAI’s ChatGPT, surpassed 10 million downloads within the first week of its public launch. The app is powered by Alibaba’s Qwen artificial intelligence models.