Ohio, one of the nation’s data center destination hot spots, is suspending a tax break that has been critical to its competition with other states to attract the massive new facilities that power and train artificial intelligence chatbots.

The move Wednesday by Republican Gov. Mike DeWine comes as tax breaks for energy-hungry AI data centers are increasingly playing a role in state budgets and the industry is under pressure to pay the full costs of the vast network of its computing warehouses needed to power AI.

The size of Ohio’s tax break skyrocketed, dwarfing previous projections, as opposition to data centers is sweeping through cities, suburbs and towns there and prompting lawmakers to form a committee to study the impact.

In the meantime, residents are trying to bypass the GOP-controlled Legislature and get a referendum on November’s midterm election ballot that’s designed to permanently ban hyperscale data centers, likely the strictest such statewide ban under consideration in the U.S.

DeWine’s office cited the rising utilization of the tax break and the state Legislature’s new research undertaking to declare a “pause” in granting it to new applicants.

“The governor felt it was the right time to let the citizens know, let businesses know that we’re going to pause on new offers of this tax incentive while that process plays out,” DeWine’s spokesperson, Dan Tierney, said Thursday.

DeWine stressed that he supports data centers — calling them a critical component in today’s economy — and that the roughly $37 billion in data center-related investment in 2024 and 2025 in Ohio has been worthwhile. Meanwhile, business groups — including the state Chamber of Commerce — and labor unions warned that pausing the tax break put Ohio at risk of losing tech-sector investments to other states.

The state, in 2024, had used previous history in projecting that the exemption would total $136 million in fiscal 2025 and $142 million in fiscal 2026. It was $554 million in 2024 and nearly $1.6 billion in 2025, the state reported.

The resumption of Ohio’s tax break — should it resume — could happen under a new governor: DeWine is term-limited and the race is on to replace him. The Republican nominee, Republican Vivek Ramaswamy — an Ivy League-educated biotech billionaire — likes to talk about turning the Ohio River Valley into the next Silicon Valley.

However, Ramaswamy and Democratic nominee Amy Acton could share the midterm ballot in November with the citizen-led drive to ban the new construction of large data centers across Ohio. It faces a July 1 deadline to gather more than 400,000 voter signatures.

State tax breaks for the massive data center industry are facing growing criticism by governors and lawmakers.