The AI infrastructure boom is creating a legal time bomb buried in contracts signed during a bull market, and disputes are likely to explode once market conditions shift. The global data center sector is in the midst of the largest infrastructure build-out in modern history, with cumulative AI infrastructure spending projected to reach approximately $7.6 trillion between 2026 and 2031. Yet the long-term agreements being negotiated today, typically spanning 10 to 20 years with take-or-pay obligations, may not survive the next market downturn, regulatory change, or technology shift that renders current assumptions obsolete.

The scale of this build-out is staggering. More than 23 gigawatts of IT capacity is currently under construction globally, with nearly 100 gigawatts of new capacity expected to come online between 2026 and 2030, effectively doubling the global installed base to approximately 200 gigawatts. Yet beneath this growth lies a critical vulnerability: the agreements being signed today will be tested by market forces that are already visible on the horizon.

Why Are These Contracts So Risky?

The data center sector is borrowing a financial structure from the liquefied natural gas (LNG) industry, where long-term take-or-pay agreements have produced decades of disputes. In these arrangements, customers commit to purchasing a minimum amount of capacity or paying for it anyway, regardless of whether they use it. Applied Digital's two AI Factory campus leases, announced in April and May 2026, are structured as 15-year take-or-pay agreements with a combined base-term value of approximately $15 billion, rising to approximately $36 billion if all renewal options are exercised. Hut 8's Beacon Point lease, announced in May 2026, is similarly structured on a "triple-net, take-or-pay" basis at approximately $9.8 billion over its base term.

The problem is that the assumptions underlying these contracts are already shifting. The hourly rental price of an NVIDIA H100 graphics processing unit (GPU), the workhorse chip for AI training, fell from a peak of approximately $8 in 2023 to a low of around $1.70 in late 2025, before rebounding to approximately $2.35 in early 2026. That represents a more than fourfold swing in less than thirty months. When overlaid with rapid GPU generational change, from the H100 to the H200 to the B200 and B300 to the Vera Rubin generation, the unit economics of compute supplied under long-term contracts become increasingly misaligned with market reality.

What Lessons Does the LNG Sector Offer?

The LNG sector provides a cautionary template. In the early 2000s and again following the COVID-19 pandemic, the European gas sector experienced waves of price-review arbitrations when long-term pricing provisions ceased to make economic sense for one party. More recently, the long-running series of arbitrations brought against Venture Global LNG by Shell, BP, Edison, and others over alleged wrongful cargo diversion has produced strikingly divergent outcomes from materially similar facts. Shell lost its multi-billion-dollar claim in an International Chamber of Commerce (ICC) award in August 2025, and a New York court declined to vacate the award in March 2026. BP won the liability phase of its claim in an ICC partial final award in October 2025, with BP reported to be seeking damages exceeding $3.7 billion. Edison reached a commercial settlement in March 2026.

That kind of variability, even in a sector with several decades of arbitral jurisprudence, should give pause to parties contemplating long-duration take-or-pay commitments in a much less developed market. The data center sector lacks the established body of case law and dispute-resolution precedent that the LNG sector has built over decades.

How Do Data Centers Differ From LNG Facilities?

While the contractual structures are similar, data centers face four significant differences that the LNG template does not adequately capture. The most critical is asset life and technological obsolescence. LNG facilities operate over 20 to 30-year horizons against relatively stable underlying technology. Data centers, by contrast, are exposed to rapid hardware generational change that can render assets less economically viable than the financing assumptions predicted. A facility built to house H100 GPUs may become economically marginal when H200 or B300 chips offer substantially better performance per dollar.

A survey of 200 senior infrastructure developers and private capital investors, conducted in March 2026, found that 89 percent expressed confidence that current capital expenditure levels are sustainable over the next one to five years. Yet 96 percent of developers expect power availability to be the constraint that reshapes the geography of the build-out. This disconnect between confidence in spending levels and concern about power constraints suggests that disputes may emerge not from demand collapse, but from misalignment between contracted capacity and actual power availability.

What Types of Disputes Are Most Likely?

The operational-phase disputes that will dominate the landscape center on three categories of agreements. Service level agreements (SLAs) between operators and tenants define uptime, performance, and reliability commitments. Power purchase agreements (PPAs) underwrite the energy supply. Long-term capacity-commitment and take-or-pay arrangements between hyperscalers and operators lock in pricing and volume commitments. Around these sit related agreements, including long-term service agreements (LTSAs) with equipment manufacturers and joint venture commitments that increasingly govern the largest assets.

The family of disputes that will likely emerge mirrors those in the LNG sector, including shortfall and delivery failures, force majeure claims, change-in-law disputes, and the vexed question of whether long-term pricing remains aligned with prevailing market reality. When GPU prices swing fourfold in thirty months, or when a new generation of chips renders existing hardware economically obsolete, the parties to these agreements will face powerful incentives to litigate or renegotiate.

Steps to Strengthen Data Center Contracts Against Future Disputes

• Technology Refresh Provisions: Include explicit mechanisms for hardware upgrades or replacements at defined intervals, with pricing adjustments tied to actual market conditions rather than fixed escalation clauses that may diverge sharply from reality.
• Price Review Triggers: Build in periodic price-review mechanisms similar to those used in LNG contracts, allowing parties to renegotiate pricing if market conditions shift materially from baseline assumptions, reducing the incentive to litigate.
• Performance Metrics Tied to Market Benchmarks: Define service level agreements and capacity commitments using market-based benchmarks for GPU pricing, power costs, and hardware performance rather than fixed assumptions that become obsolete as technology evolves.
• Dispute Resolution Pathways: Establish clear escalation procedures, including mediation and expert determination before arbitration, to resolve disputes more quickly and predictably than the divergent outcomes seen in LNG arbitrations.
• Force Majeure and Change-in-Law Provisions: Clearly define what constitutes force majeure in the context of rapid technological change and regulatory shifts, and establish procedures for adjusting obligations when laws or regulations change materially.

The data center sector is currently in a bull market characterized by capital abundance and growth pressure. Counterparties presented with operational problems generally renegotiate, accommodate, or absorb them in such conditions. However, history suggests that disputes often arise only after the first material market dislocation, whether a demand correction, a step-change in input prices, a major regulatory change, a counterparty failure, or a technology shift that renders an asset less economic than initial financing assumptions predicted.

The agreements being negotiated and signed today will be enforced through the next downturn, the next change in global policy, and the next generation of hardware. Without more resilient contract structures that account for the unique technological volatility of the data center sector, the industry may face a wave of disputes that makes the LNG arbitration saga look like a dress rehearsal.