Artificial intelligence (AI), and the data centers that power it, have quickly become one of the most debated economic and infrastructure issues in the United States—and nowhere is that debate more intense than in Texas. Supporters see data centers as the backbone of innovation, national security, and long-term economic growth. Critics worry about water use, strain on the power grid, noise, and the pace at which massive industrial projects are arriving in small communities. Both sides have legitimate points, and a common-sense approach requires understanding why data centers are coming, what they bring with them, and what challenges still need to be addressed.
The renewed national focus on AI began almost immediately with President Donald Trump’s return to the White House. Early executive actions included an order titled “Removing Barriers to American Leadership in Artificial Intelligence,” which rolled back several Biden-era policies described as “barriers to American AI innovation, clearing a path for the United States to act decisively to retain global leadership in artificial intelligence.” The message was clear: AI is not just another technology trend, but a strategic priority tied to economic competitiveness and national security.
That same urgency was reflected in January when OpenAI, SoftBank, Oracle, and MGX announced a $500 billion AI initiative alongside the president. Investments of that scale do not exist in the abstract. They require physical infrastructure—vast amounts of it—and that infrastructure increasingly points to Texas. With its relatively low energy costs, large land availability, business-friendly regulatory environment, and central location, Texas has become one of the most attractive destinations for large-scale data center development in the country.
To understand why these facilities are so large and so resource-intensive, it helps to understand what data centers actually do. At their core, data centers house millions of graphic processing units (GPUs), servers, cooling systems, power distribution equipment, and networking hardware. These machines operate around the clock, processing enormous volumes of data at incredible speed. This computational power is what allows AI systems to train large models, improve autonomous driving technology, support space exploration, and enhance military capabilities. Without data centers, modern AI simply does not function.
Major technology and manufacturing companies have already placed significant bets on Texas. Nvidia, the world’s leading GPU manufacturer, announced in April that it plans to build “supercomputer manufacturing plants” in Dallas and Houston. In July, Samsung said it intends to begin development of an AI chip for Tesla at its Taylor manufacturing facility.
Fermi America, led by former Texas governor and former U.S. Secretary of Energy Rick Perry in partnership with Texas Tech University, unveiled plans for a “HyperGrid campus” designed to “deliver next-generation artificial intelligence.” Google added to the momentum by announcing it would invest $40 billion into Texas data center infrastructure. These data centers and a few others will be located near Amarillo and in the Texas Panhandle.
These investments are not just symbolic. They come with tangible economic benefits that are already being felt across the state. According to a February report from the Data Center Coalition, data centers contributed “over $1.6 billion in tax revenue, and statewide, data centers generated almost $1.6 billion for local taxing authorities in Texas” by the end of 2024. The same report estimates that “over the next several years” those contributions will grow to more than “$3.8 billion in additional revenue for the government of the State of Texas and over $4.9 billion in additional revenue for schools and local governments.”
For communities that host them, data centers can mean new tax bases, improved school funding, upgraded roads and utilities, and long-term stability. Unlike some industries, data centers tend to be relatively resistant to economic downturns, because digital infrastructure remains essential regardless of broader market conditions. For state leaders focused on keeping Texas competitive, these facilities look like a logical extension of the state’s long-standing strategy of attracting large-scale investment.
Still, economic benefits do not automatically erase local concerns. There are more than 4,200 data centers operating across the country, and over 400 of them are already in Texas. As that footprint grows, resistance has emerged—especially in smaller towns and unincorporated areas that feel overwhelmed by the speed and scale of development.
In a suburb north of Waco, plans for “up to six” data centers prompted residents to organize and post a petition opposing the project. “For those of us who call this area home, it’s a frightening prospect,” the petition states. In Hood County, residents are locked in a legal dispute with a local cryptocurrency mining facility over the authority to set a noise ordinance, highlighting a recurring complaint: constant fan noise that residents say disrupts daily life.
Water use is another flashpoint. Data centers require cooling systems to prevent equipment from overheating, and in a state that regularly experiences drought, residents are understandably sensitive to large industrial users drawing on local water supplies. Power consumption raises similar concerns. Texas already walks a fine line when it comes to grid reliability, and many Texans worry that a rapid influx of high-demand facilities could increase the risk of outages or drive up electricity costs.
Recognizing these issues, lawmakers took steps during the 89th Legislature to address some of the most pressing challenges. Senate Bill 6 established clearer guidelines for how data centers interconnect with the Electric Reliability Council of Texas (ERCOT) grid, aiming to ensure reliability and transparency as new facilities come online. Senate Bill 1 allocated millions of dollars to the Texas Water Development Board to help plan for the cooling and water needs of both current and future data centers.
These measures reflect an important reality: data centers are not going away, but they also cannot be treated as consequence-free development. Common sense suggests that the path forward lies somewhere between unchecked expansion and blanket opposition. State leaders, local officials, companies, and residents all have a role to play.
From a policy perspective, that means continuing to strengthen grid planning, incentivizing energy efficiency, and encouraging data centers to invest in on-site generation or innovative cooling technologies that reduce water usage. It also means giving local communities a meaningful voice in zoning, noise standards, and infrastructure planning, rather than forcing projects through with minimal engagement.
From an industry standpoint, companies would be wise to recognize that long-term success in Texas depends on trust. Proactively addressing noise, water conservation, and community integration is not just good public relations—it reduces legal risk and political backlash. Transparency about resource usage and clear communication with residents can go a long way toward easing fears.
As Texas heads into the 90th legislative session, water availability, power generation, and noise ordinances will remain at the center of the debate. The question is not whether AI and data centers will continue to grow—they will—but whether that growth can be managed in a way that balances innovation with quality of life.
Texas has long prided itself on being a place where big ideas and big projects can thrive. With thoughtful policy, responsible industry practices, and genuine local engagement, data centers can be part of that tradition rather than a source of ongoing conflict. Whether local opposition grows louder or gradually subsides will depend largely on whether common sense prevails in how these challenges are addressed.
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