Texas Governor-Elect Hinojosa Says New Laws Will Shield Residents From Data Centres

"Data centers have moved into mostly rural communities, and there are no rules and laws to protect Texans," Hinojosa said in a CNN interview on Thursday, according to Reuters. She said communities should have "a seat at the table" in deciding whether and how facilities are built near them.

The stakes are high for the AI industry. Plentiful energy, relatively cheap land and business-friendly policies have made Texas one of the main locations for the data centres that train and run AI models. A pause there would hit developers, chipmakers and power suppliers whose growth plans rely on the state's grid. Investors are already worried: concern that the midterm results will slow data centre construction helped push the Nasdaq down 5.5% on Thursday, and Asian chip stocks fell sharply on Friday.

Hinojosa takes office on January 19 and will govern alongside a Democratic-controlled state House, KWTX reported. During the campaign she promised to freeze data centre approvals until the Legislature, which meets in January, passes new protections. Her stated priorities include requiring operators to hire union workers, protecting community water supplies, ending the nondisclosure agreements that make projects hard for the public to track, making sure Texans do not pay higher electricity bills because of data centres, and ending tax breaks that cost the state sales tax revenue.

Abbott had already moved in the same direction. He was one of the first Republican governors to stop new data centres connecting to the state grid, and ordered an audit of projects. According to KWTX, he paused state grid and environmental permitting approvals until the audit, due this year, is finished, and said he would try to end data centre tax breaks in the next legislative session. The open question is how much further his successor will go, and whether a temporary pause becomes law.

The outcome also matters for Elon Musk, whose SpaceX and Tesla are based in Texas and who backed Abbott. Hinojosa told CNN the state can work with Musk's companies, but on her administration's terms. She said she had asked the Texas Parks and Wildlife Commission to take no action during the transition on Boca Chica State Park, which Texas Monthly reported in October the state had discussed selling to SpaceX. SpaceX did not respond to Reuters' request for comment.

The Data Center Coalition, an industry group, said it wants to keep working with state leaders and local officials. Kathryn Guerra of the consumer group Public Citizen said community anger across the political spectrum "just seems to have been a reflection" in the election result.

Texas is not the only state where this is happening. Data Center Watch found that 43% of the 74 candidates for governor it studied across 36 states supported a moratorium or ban on data centres. The first test of Hinojosa's plan will come when the Legislature convenes in January and decides how far to write her conditions into law.