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By Anna Skinner
Associate News Editor
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Texas has hit the brakes on one of the country's fastest-growing industries, announcing a pause on new data center approvals as state officials conduct audits of projects seeking to connect to the electric grid.
The move comes as demand for artificial intelligence (AI) infrastructure fuels a nationwide construction boom, while concerns over electricity use, water consumption and community impacts continue to grow.
Governor Greg Abbott directed the Public Utility Commission of Texas (PUCT) and the Electric Reliability Council of Texas (ERCOT) to conduct a comprehensive review of all data center projects advancing through the state's grid interconnection process before any additional developments can move forward. Abbott said projects that fail to meet state requirements should be denied access to the grid.
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When reached for comment, Abbott's press office referred Newsweek to a letter written by the governor and sent to ERCOT's president.
"Any data center project that fails to comply with the verification and audit process to protect the reliability and resilience of the Texas electric grid must be denied," the letter said. "Simply put, Texans must come first."
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The decision marks a notable shift for Texas, which has long been viewed as one of the most business-friendly destinations for technology investment. Tech companies have flocked to the state because of its relatively low regulation, large amounts of available land and abundant energy resources. Texas currently hosts more data centers than every state except Virginia, according to the Pew Research Center.
According to ERCOT, there are roughly 474 gigawatts of pending requests to connect large new projects to the Texas grid. Abbott's office said about 90 percent of those requests are tied to data centers, many of them linked to the rapid expansion of AI computing. That figure is more than five times Texas' current peak electricity demand, raising questions about grid reliability, resource use and long-term costs for residents.
Under Abbott's directive, regulators are being asked to collect detailed information about proposed facilities, including their expected electricity usage, water consumption, ownership structures, tax incentives and plans to reduce impacts such as noise and light pollution.
The governor said the goal is to protect Texans while ensuring future development can proceed responsibly. No timeline for completing the audits has been announced.
Where Data Centers Are Still Booming: Map
Even as Texas pauses new projects, the broader U.S. data center industry continues to expand.
A Pew analysis found that the United States has more than 3,000 operational data centers, with more than 1,500 additional facilities planned or under development. Most of that future growth is expected to occur in the South and Midwest, which together account for roughly three-quarters of planned projects nationwide.
The states with the largest number of operating data centers are Virginia, Texas and California, with 398, 296 and 277, respectively, Pew Research reported. Hundreds of more projects are planned. States with the most data centers are (place cursor over each of the states below to see the number):
- Virginia
- Texas
- California
- Illinois
- Georgia
- Ohio
- Arizona
- New York
- Oregon
- Washington
- Pennsylvania
- Florida
- North Carolina
- Iowa
- Indiana
Notably, growth is increasingly moving into rural areas. Pew found that roughly two-thirds of planned data centers are in rural communities, a sharp contrast with existing facilities, which are predominantly in urban areas.
Texas' move comes just weeks after New York Governor Kathy Hochul announced a temporary pause on certain large-scale data center projects while state officials study their effects on energy demand, water use and local communities. Hochul said the review is intended to ensure communities benefit from AI-driven investment rather than simply absorb its costs.
Following news of Texas' latest move, Hochul appeared to draw a comparison between the two states' approaches.
"Imitation is the sincerest form of flattery," she posted on X.
What Happens Next
As technology companies race to build the infrastructure needed for AI, policymakers are facing a difficult balancing act: encouraging investment and job creation while ensuring the facilities do not overwhelm local resources.
Texas' decision suggests that even states traditionally eager to attract large-scale development are becoming more cautious about how, and where, the next generation of data centers is built.
Contact Newsweek editors on this story: Samantha Beech and Dave Siminoff.
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