The Texas gubernatorial election has become a critical race for the data center industry. Throughout 2025, current Republican Gov. Greg Abbott courted developers, pointing to the state’s ream of existing energy infrastructure and open land. In November last year, the governor called Texas the “epicenter of AI development” as Google (GOOG<\/a>, GOOGL<\/a>) signed a $40 billion commitment to build three data center campuses in the state. <\/p>\n By August 2026, the Electric Reliability Council of Texas (ERCOT) said it was reviewing 476 gigawatts’ worth of proposed new electricity demand, equal to more than five times the state’s highest recorded electricity load \u2014 with roughly 90% of those requests coming from data center developers. <\/p>\n The wave of development has prompted a growing tide of local backlash amid concerns about energy and water use, to the point that, in August, Abbott shifted his stance on the industry. The governor recently ordered an audit of proposed data center projects<\/a> planned for ERCOT, prompting the Texas energy grid operator to reduce the system’s 2027 expected energy load growth from 14% to 6% due to the pause in new data center development. <\/p>\n More recently, Abbott said during public remarks that data center developers “dug their own grave<\/a>.” <\/p>\n In the upcoming gubernatorial election, Abbott will run for reelection on the Republican ticket against Democratic candidate Gina Hinojosa, who has made Abbott’s connections to the data center industry a key point of her critique. The Democrat has imposed an\u00a0immediate moratorium on data center construction<\/a>, set to last until the Texas legislature can pass legislation to control development, a key part of her platform. <\/p>\n That said, moves like Abbott’s audit can be good for the industry, Melius’s West wrote, reducing “phantom demand,” where developers submit proposals for the same project to multiple jurisdictions, shopping around for the fastest and cheapest option while creating an unrealistic picture of legitimate demand. <\/p>\n “We read this as constructive rather than bearish for incumbents,” West wrote. “Audits, registries, and curtailment obligations thin a queue everyone privately knew was inflated \u2014 and they advantage owners of energized, dispatchable, contracted assets over speculative developers.” <\/p>\n The shift, West said, is that major developers are increasingly moving toward deals that will enable them to build out large-scale power infrastructure directly, rather than tacking their projects onto an already strained power grid. NRG Energy (NRG<\/a>) recently advanced a 1.2 gigawatt “bring your own power” project in Texas with a leading hyperscaler. Constellation Energy (CEG<\/a>) signed long-term contracts for 920 megawatts of nuclear power. <\/p>\n As lawmakers look intently at residential power bills and grid demand, developers will have to build their own solutions, West said. <\/p>\n “The common thread is that the structures are migrating toward customer funded generation and contractual curtailability, which is exactly what the political process is demanding,” West wrote. <\/p>\n Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com. <\/p>\n<\/a> Texas Gov. Greg Abbott and Alphabet and Google CEO Sundar Pichai lead a panel at the Google Midlothian Data Center on Nov. 14, 2025, in Midlothian, Texas. (Ron Jenkins\/Getty Images) \u00b7 Ron Jenkins via Getty Images <\/p>\n
<\/a> Texas’s ERCOT power grid has forecast explosive growth in power demand as data center developers look toward the state. (Chart: ERCOT) \u00b7 ERCOT <\/p>\n
<\/a> Texas Democratic gubernatorial candidate Gina Hinojosa speaks during a campaign rally as part of the “New American Dream Tour” in Beeville, Texas, on Aug. 22, 2026. (Ronaldo Schemidt\/AFP via Getty Images) \u00b7 RONALDO SCHEMIDT via Getty Images <\/p>\n
<\/a> In an aerial view, the Meta El Paso Data Center is seen on Aug. 13, 2026, in El Paso, Texas. (Brandon Bell\/Getty Images) \u00b7 Brandon Bell via Getty Images <\/p>\n