Texas governor-elect Hinojosa demands data center moratorium

Gina Hinojosa, the Democrat who defeated Greg Abbott in the Texas gubernatorial race, said Thursday that Texas should stop building data centers until laws exist to protect residents from the way the industry strains the state's power grid and water supply. "It is not that I hate data centers," she told CNN's Jake Tapper. "I hate the way they are taking advantage of Texas. And that stops when I'm governor."

The market registered the message immediately. The Nasdaq fell more than 5 percent by midday Thursday on fears that Democratic midterm wins would bring moratoriums on the AI buildout. A Morgan Stanley index of neocloud stocks dropped 12 percent. Goldman Sachs estimates that states likely to restrict data centers hold about 45 percent of planned US capacity, with Texas alone accounting for about 25 percent.

CNN's exit polling in the Texas race found voters opposed to data centers in their own communities by 75 to 25 — a striking number for an industry that has sold itself as economic development. Hinojosa's argument is that the facilities concentrated in rural counties where "there are no rules and laws to protect Texans," and that communities need the ability to walk away from the negotiating table to extract concessions.

The federal response was an exercise in deflection. National Economic Council director Kevin Hassett told CNBC Friday there is "plenty of room for data center growth to continue" and, according to third-party accounts of the interview, that "we want communities to decide on data centers." The same administration pushing the boom thus hands the contested political cost back to the counties absorbing it. Trump, in his State of the Union address, said tech companies had agreed to pay a greater share of the costs data centers place on utilities and their customers, and in October floated having developers pay communities a "dividend" to make projects popular.

Texas regulators were already moving, at least on paper. On September 21, Abbott ordered the Texas Commission on Environmental Quality to halt all data center permits until the state's grid operator finishes an audit. A public-radio investigation found the commission kept issuing some permits anyway — an order and its enforcement being separate matters. Hinojosa takes office January 19.

One of the state's most prominent residents, Elon Musk, is meanwhile recalibrating: he said Wednesday he had spent 158 million dollars on Ken Paxton's Senate campaign, which Paxton lost to Democrat James Talarico.

An industry built on the assumption of unlimited electricity just met the people who pay the electricity bills.