A Republican-controlled Texas state legislature will vote on a bill that would significantly stifle Donald Trump’s efforts to spur artificial intelligence infrastructure development across the United States. The bill would impose additional regulatory hurdles on data centers, which can force delays of up to two years.
Texas Regulations Threaten Trump’s $500B AI Data Center Project
Earlier this year, the Trump administration revealed a sweeping partnership named Stargate. The plan is to build 20 data centers to host the computing necessary for AI creation to put the United States in the race with China for the top spot in this key technology.
Stargate represents a massive investment, with OpenAI, SoftBank, Oracle, and UAE-backed investor MGX collectively pledging up to $500 billion. The consortium selected Texas for its first data center, attracted by the state’s traditionally light regulatory approach and existing energy infrastructure.
However, Texas Senate Bill 6 (SB6) now threatens to derail these plans by introducing substantial new regulations. The bill would create a six-month review process on top of the existing 6-18 month evaluation period. Companies would also face additional fees to the Texas grid operator and requirements to install backup generators, dramatically increasing construction costs.
“These heavy-handed mandates risk stifling investment on exactly the infrastructure needed for Trump’s AI initiative,” said Vance Ginn, who served as associate director of economic policy at the White House Office of Management and Budget during Trump’s first term.
The legislation has already passed the Texas state senate and is considered a priority for Lieutenant Governor Dan Patrick. The push for stricter regulations stems from the catastrophic failure of the state’s power grid during Winter Storm Uri in 2021, which left millions without heat for days and resulted in at least 246 deaths.
Patrick defended the bill, stating: “Senate Bill 6 actually ensures President Trump’s Stargate Plan is a success. We have made clear we are in lockstep with the President on his goal to make America number one, and dominate China on AI, data centers, and cryptocurrency.”
The lieutenant governor emphasized that these industries “will have to supply their own power needs” to prevent costs from being “disproportionally shifted onto residential and small business customers.”
Challenges to Texas Data Center Plans Amidst Global AI Race
If tech companies abandon plans to build in Texas due to these regulatory challenges, analysts suggest they might not build the data centers at all. While other states like Wyoming, Wisconsin, and Tennessee have courted these construction projects, they lack Texas’s robust infrastructure.
The timing is particularly challenging as the development of global computing infrastructure faces a slowdown. Microsoft has already canceled several data center projects across the country, though the company maintains it will invest $80 billion in data centers during its fiscal year ending in June.
Alibaba chairman Joe Tsai recently warned of a potential bubble in data center construction, suggesting new projects may exceed actual demand for AI services.
Further complicating matters are Trump’s new tariff policies, which impose a 10% tariff on all imports and a hefty 125% tariff on imports from China. Many components used in data centers, from raw materials like steel to specialized equipment such as electrical transformers, are produced outside the United States.
These challenges emerge against the backdrop of an intensifying global AI competition. DeepSeek, a new Chinese AI company that appeared seemingly out of nowhere in January, has already released several AI models developed in a fraction of the time taken by U.S. companies. This rapid advancement has caused alarm in Silicon Valley and underscored the stakes in the global AI race.
As Republicans maintain control of the Texas state legislature, even critics acknowledge that preventing another widespread power outage represents a rare political issue with the potential to undermine GOP majorities. The memory of governmental failures during Winter Storm Uri, which led to numerous officials being fired or replaced, continues to influence policy decisions in the state.
