MW How Texas became the epicenter of the AI data-center boom
By Hannah Pedone
'It's easier to build a power plant in Texas than it is in any other state,' one expert notes
A Melius Research analyst believes Texas is a new nexus for the data-center build-out.
With inexpensive real estate, no state income tax and minimal regulation, Texas increasingly stands out as a hub for artificial-intelligence players.
While Virginia has the most existing data centers, Texas has the most megawatts of data centers under construction. That's according to Melius Research analyst James West, who said Texas is becoming the new "backbone" of the AI build-out.
"The scale of the Texan push for data centers is difficult to overstate," he said in a Tuesday note.
On top of "cheap and abundant land," Texas has a uniquely deregulated energy grid, he said. The state has its own power market, the Electric Reliability Council of Texas, or Ercot, which is exempt from most federal regulations, West added. In Texas, buyers can negotiate directly with generators, unlike in most other states.
David Spence, a law professor at the University of Texas at Austin specializing in energy law, had a similar view.
"It's easier to build a power plant in Texas than it is in any other state," he said, noting that there are fewer regulatory barriers, adding that it's not necessary to acquire a permit in Texas to build a plant.
He said that developers are attracted to "cheap power" and the advantages posted by Texas' subdued regulatory backdrop, which makes it quicker to get a project up and running.
West also noted that the state government "actively courts hyperscaler investment," which he said has been essential to driving more data-center build-outs.
Alphabet-owned Google $(GOOG)$ $(GOOGL)$ has pledged to invest $40 billion in Texas for three new data centers. Amazon.com Inc. (AMZN) has plans to build a $5 billion project in Somervell County, next to Vistra's Comanche nuclear plant, according to a motion from the Commissioners Court. And Meta Platforms (META) has a $1.5 billion project in El Paso. Fermi America $(FRMI)$ plans to build an 11-gigawatt private grid in Amarillo.
While some Americans have chafed at the idea of new data centers in their backyards and blamed AI companies for driving up household energy costs, West said there isn't clear evidence that data centers are responsible for higher home utility bills. At the same time, it's in the interest of both hyperscalers and regulators to keep residential power costs in check, he said, as local backlash could damp enthusiasm for new projects in the state.
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From an investment perspective, West said that independent power producers will be major winners of the Texas data-center bonanza. He pointed to Vistra (VST), NRG Energy $(NRG)$ and Constellation Energy (CEG) as three players with exposure in the ERCOT market.
He also said equipment companies like Baker Hughes $(BKR)$ and GE Vernova (GEV), which sell "picks and shovels," will be major beneficiaries, along with gas majors including EQT $(EQT)$ and Chevron $(CVX)$.
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-Hannah Pedone
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March 12, 2026 07:38 ET (11:38 GMT)
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