The Democrats' stunning victories in the Lone Star state have thrown the future of one of America's most business-friendly states into question, raising uncertainty over everything from data centers and energy pipelines to Elon Musk's sprawling infrastructure investments.
Arguably the biggest question for Texas will be the future of the state's data center boom, as investors and developers looking for wide swaths of land and an abundant power supply have found both in spades.
That same question is being asked nationally after Democrats firmly flipped both chambers of Congress and a host of state ballot measures aimed at slowing data center development across the country were voted into effect. In Ohio, for example, all 18 communities where anti-data-center legislation was on the ballot resoundingly passed those measures. Similar ballot items passed in states ranging from California and Florida to Illinois.
Newly elected governors and congressional leaders have also made data center slowdowns or regulation an outspoken part of their campaign pledges, threatening further legislative action to hamper the data center boom. The Senate — still controlled by Republicans until the new Congress begins its term on Jan. 3, 2027 — on Monday voted to take up a bill that would impose sweeping reforms on US environmental law, speeding up the permitting process for everything from power plants and pipelines to transmission equipment, all vital to the data center build-out.
Potential delays on projects
Texas is expected to account for roughly 30% of the US data center capacity planned to come online by 2028, and about a quarter of that expected to be online by 2030, according to data from SemiAnalysis. Any lasting moratorium could call that pipeline into question.
"The Democratic side explicitly campaigned on stricter data center regulation, and we expect Democratic governors in Texas, Georgia, and Michigan to impose conditional moratoria pending new legislation restricting data centers," Goldman Sachs strategists led by Jan Hatzius wrote to clients on Wednesday.
Developers in Texas have already spent the past three months dealing with executive action from outgoing Governor Greg Abbott, who, in a set of orders signed through August and September, has frozen new data center projects in the state pending reviews by ERCOT, which oversees the Texas electrical grid, and environmental regulators.
When Gina Hinojosa takes office in January, developers who had hoped to take advantage of Texas' abundant land and power could face an even steeper uphill battle. Hinojosa, the first Democrat elected to govern Texas since 1991, has called for a full statewide moratorium on new development until the state legislature can pass policy to govern the burgeoning industry.
Roughly 13 gigawatts of data center capacity is likely to be called into question by Hinojosa's victory, according to GLJ Research analyst Gordon Johnson. While "projects with power, permits and steel keep going," Johnson wrote to clients on Tuesday, those that have secured power supply but don't yet have environmental permissions could be delayed by 12-to-18 months.
Hinojosa has said publicly that any moratorium would only apply to new permit applications, leaving projects that have already broken ground untouched. That said, the incoming governor has also said she supports broader data center policies that could make projects more economically taxing for developers, such as banning state subsidies and requiring American labor union jobs.
Hinojosa is likely to preserve Abbott's current data center permitting audit through the first quarter of 2027, potentially followed by a new moratorium that could push s and policy uncertainty through the end of the calendar year, TD Cowen analysts John Miller and Cooper Pryde said Wednesday.
The analysts called Texas "the flash point for data center policy."
Musk's presence in Texas faces questions
The other major question mark for Texas is Elon Musk and the massive infrastructure investments he has made. Musk moved his companies' largest operations to the state in the wake of government restrictions aimed at combating the spread of the COVID-19 pandemic.
SpaceX has invested more than $3 billion into Starbase and the nearby Starship launch infrastructure, while Tesla has reported construction costs of more than $1 billion for its Gigafactory production site in Austin. In August, SpaceX and Tesla laid out a joint plan to spend $16.8 billion building a "Terafab" semiconductor production facility in Grimes County, while a recently proposed solar cell manufacturing plant in Fort Bend County is projected to cost more than $10 billion.
If both planned projects come to fruition, Musk's infrastructure investments alone in the Lone Star State could total more than $30 billion. The results of the elections — in which Musk was a major financial backer of Republican candidates who mounted unsuccessful campaigns — could prove challenging to the centibillionaire's Texas ambitions. "Data centers in space looking pretty appealing right now," Musk wrote on X Tuesday night, adding in a separate post shortly after, "Guess my election-interfering space lasers didn't work this time."
Follow Jake Conley on X @byjakeconley or email him at jake.conley@yahooinc.com.