Donald Trump’s plan to expand infrastructure to produce artificial intelligence in the United States could face years of delays with the Republican-controlled Texas Capitol, poised to pass laws that place regulatory hurdles on data centers.
Earlier this year, the Trump administration announced that a joint venture called Stargate would be building a total of 20 data centers to provide AI computing power as part of an effort to help the US compete with China for technology leadership.
The companies behind Stargate – Openai, Softbank, Oracle and MGX are UAE-backed investors, which have pledged up to $500 million.
However, building future data centers to support Trump’s AI agenda is facing headwinds as a result of Texas law SB6. This will set the goal of protecting its own power grid in the face of the storm and introduce new regulatory measures that include a six-month review process in addition to the existing 6-18-month assessment period.
The impact of the proposed invoice ranges in two ways. Regulatory measures could result in an approval process of up to 24 months, but the requirement to pay an additional fee to Texas Grid Operator to install a backup generator dramatically increases construction costs.
Equity analysts say this could lead tech companies to reduce planned construction of state data centers. For example, Stargate has begun building the first 10 data centers in Abilene, Texas, but it is unclear whether the second set of 10 is covered by the bill.
And if tech companies aren’t built in Texas, they may not build any data centers that directly hinder Trump’s AI initiatives. Other states, from Wyoming to Wisconsin, Tennessee and Tennessee, are seeking these construction projects, but they lack the infrastructure that exists in Texas.
“These forced orders will reduce the risk of curbing investment in the infrastructure needed for Trump’s AI initiative,” said Vance Ginn, Texas-based, associate director of economic policy at the White House Office of Management and Budget, Trump’s first term.
One of the legislative priorities for Lieutenant Governor Dan Patrick, the bill, which has already passed Texas Senators, aims to repeatedly avoid the impact of winter Storm Uri in 2021. The storm, which killed at least 246 people, exposed reliability issues on the state’s energy grid.
“Senate Bill 6 actually ensures that President Trump’s Stargate plan will succeed,” Patrick said in an emailed statement. “We have made it clear that we are lockstepping with the president with the goal of making America number one and dominating China with AI, data centers and cryptocurrency.
“These industries have to supply their own electricity needs and are committed to that goal, so they understand that costs don’t move disproportionately to residential and small business customers,” Patrick said.
Republicans now control the Texas legislature, and even critics of the bill have acknowledged that another widespread blackout is a political issue that could possibly undermine the GOP majority. Several government officials and those who controlled the power grid were fired or replaced after the failure.
However, the prospects for larger regulatory hurdles, coupled with the global slowdown in computing infrastructure development and the additional macroeconomic uncertainty resulting from increased construction costs associated with Trump’s tariff plans, could have far-reaching implications.
Research notes from analysts at TD Cowen say that Microsoft has already abandoned many data center projects in the US, including lease cancellations and postponements, but Microsoft says it is still on track to invest $800 billion in data centers for the fiscal year ending in June.
Last month, Alibaba Chairman Joe Tsai warned of a potential bubble in the data center, suggesting that new projects could exceed the demand for AI services.
Meanwhile, Trump’s measures now impose a 10% tariff on all imports and a new 125% tariff on imports from China announced Wednesday. Many components used in data centers, from raw materials such as steel to products such as electric transformers, are produced outside the United States.
The investment in AI sparked alarms in Silicon Valley with the wider global AI arm race, when Deepseek, a disruptive new Chinese company, emerged out of nowhere in January, releasing a series of AI models developed in part in the era created by US companies.
