Texas Elects Hinojosa, Putting 13.3 GW of Data Center Plans at Risk

Gina Hinojosa defeated Texas Governor Greg Abbott on Tuesday, and her proposed moratorium on new data centers could put 13.3 gigawatts of announced projects at risk, according to an estimate by investment bank Jefferies reported by The Wall Street Journal. Hinojosa, a Democrat, campaigned on halting new data center development until state lawmakers pass stronger protections for residents. Her victory makes her the first Democrat elected governor of Texas since Ann Richards in 1990.

The result lands in the country's second-largest data center market, behind Virginia, and it comes less than a year after Abbott stood beside Google CEO Sundar Pichai to celebrate the company's $40 billion investment in Texas cloud and AI infrastructure. Three new data center campuses would help make Texas, Abbott declared, the "epicenter of AI development." At a summer press conference, Hinojosa accused corporations of taking advantage of Texans and operating with little oversight, blaming Abbott for creating the "Wild West of data centers."

How big is Texas's AI bet?

Texas's $2.9 trillion economy is the nation's second-largest; if it were a country, it would rank eighth worldwide. Abundant energy, inexpensive land, and a light regulatory touch drew AI firms to the state. Researchers at Rice University's Baker Institute estimate annual data center investment in Texas rose from $3.4 billion in 2022 to a projected $66.2 billion in 2026—nearly a twentyfold increase in four years.

Texas accounts for roughly 26% of planned American data center capacity, nearly three times the amount planned in Virginia, according to the Jefferies analysis. Jefferies estimated the proposed moratorium could delay construction or force developers to abandon plans. Bank of America called the Texas governor's race the most consequential contest of the 2026 midterms for utility and power markets.

Who gets the benefits and who pays the costs?

Hinojosa has proposed a moratorium until lawmakers enact lasting safeguards. Her agenda includes:

• Prohibiting nondisclosure agreements that keep communities in the dark about projects
• Giving residents greater say over new developments
• Requiring companies to prove projects won't raise household water or electricity bills
• Eliminating government subsidies for the industry

One subsidy is particularly lucrative: qualifying data centers can avoid Texas's 6.25% sales tax on equipment and other purchases for up to 20 years. The state comptroller projected the exemption would cost $3.2 billion in foregone revenue over two years—about $1.6 billion a year—and called that figure potentially an underestimate. The industry argues the incentives attract investment, jobs, and other tax revenue. Critics question the public return when facilities place substantial demands on utilities and natural resources.

A Texas Tribune analysis found about half of planned data centers are slated for unincorporated areas, where counties generally lack the zoning authority cities use to regulate development. That leaves nearby residents little say over projects that could transform their communities. University of Texas researchers estimate data centers currently account for less than 1% of the state's water use but could reach 9% by 2040. Proposed facilities are seeking so much power that Texas's grid operator has had to rethink how it assesses connection requests.

Was the backlash bigger than Abbott?

Yes—and broader. A University of Houston poll found 79% of respondents supported limits on data center construction, while 76% expected new facilities to drive up electricity bills. Abbott saw those figures and began to retreat. In September, after years of courting developers, he halted new permitting approvals pending audits of projects' water and electricity demands and promised to pursue eliminating tax incentives. His restrictions were tied to those audits; Hinojosa wants development on hold until lawmakers create permanent protections.

Interpreting the victory as a referendum on data centers alone would be a mistake. Texans were also deeply dissatisfied with the cost of living and political corruption, and Republicans faced a difficult national environment under President Donald Trump and his deeply unpopular Iran War. James Talarico defeated Attorney General Ken Paxton to become the first Democrat elected to the U.S. Senate from Texas since 1988; he has also called for tougher data center standards, though Hinojosa will hold more immediate influence over the industry's future.

What can a governor actually do?

Not everything. A governor can set priorities and direct state agencies within existing law, but permanently changing tax exemptions or expanding county zoning powers requires the Legislature. A statewide moratorium could also encounter legal obstacles. Still, developers contemplating billions in new investments must now reckon with tougher rules that could remain in place for years.

Developers can look elsewhere—but other states face their own constraints on electricity, water, and land, and their own increasingly skeptical communities. Texas may be an especially consequential example of the industry's political difficulties, but it is hardly an isolated one.