The Governor’s Warning Marks A Sharp Turn From His Earlier AI Push As Gina Hinojosa Calls For A Moratorium And Stronger Protections
Gov. Greg Abbott said data center companies have “dug their own grave,” delivering his strongest rebuke yet of an industry he once aggressively courted as a pillar of Texas’ economic future.
Abbott told ABC’s “This Week” that developers expanded too quickly and entered communities without first building local support, according to Axios. He said the industry deserves the political backlash it is now facing.
The remarks represent a dramatic change in tone from an administration that previously promoted Texas as one of the nation’s leading destinations for artificial intelligence infrastructure. They also come as Democratic gubernatorial nominee Gina Hinojosa argues Abbott waited until public opposition threatened him politically before taking action.
From AI ‘Epicenter’ to Industry Crackdown
In November 2025, Abbott joined Google executives to announce a $40 billion investment in three new Texas data center campuses. At the time, he called Texas “the epicenter of AI development.”
By June, however, Abbott had directed state regulators to require data centers to cover the cost of electrical infrastructure needed to serve their operations rather than passing those expenses to residential customers. He also called for phasing out some of the tax incentives used to attract the industry.
Abbott escalated that response on Aug. 3 by ordering the Public Utility Commission of Texas and the Electric Reliability Council of Texas to audit data centers seeking connections to the state’s power grid before allowing projects to advance.
The review requires developers to disclose projected electricity and water use, public tax incentives, ownership interests, plans for on-site power generation and measures intended to reduce effects on surrounding communities.
ERCOT was considering about 474 gigawatts of proposed connections when Abbott issued the directive — more than five times the state’s record peak demand. According to the governor’s office, data centers accounted for approximately 90% of those requests, although many of the proposed projects may never be built.
Hinojosa Says Abbott Allowed the Problem to Grow
During a recent exclusive interview with the San Antonio Observer, Hinojosa argued that Abbott helped create the conditions now fueling public anger.
“All these data centers are now in Texas because Greg Abbott gave them the richest tax breaks in the country,” Hinojosa said.
Hinojosa said Texas households could be forced to pay at least $600 more annually to cover infrastructure needed to serve the facilities. She called for an immediate moratorium on new projects and a special legislative session to establish statewide rules governing electricity costs, water consumption, tax incentives and community protections.
Related: Exclusive: Gina Hinojosa Speaks With The San Antonio Observer, Says Frustration Over Affordability, Schools, Utilities And Data Centers Could Fuel A Democratic Breakthrough
She also accused Abbott of accepting roughly $20 million from donors with significant data center interests. The figure comes from Hinojosa’s campaign and has not been independently verified by the Observer.
Hinojosa described the issue as another example of what she calls the “Greg Abbott corruption tax,” arguing that taxpayers are being asked to subsidize infrastructure benefiting large corporations.
Abbott’s audit stops short of the statewide moratorium Hinojosa has requested. Projects may still move forward once regulators complete their reviews and determine that developers have complied with state requirements.
The Fight Extends to CPS Energy
The data center debate is unfolding alongside Abbott’s push to open municipally controlled electricity markets in San Antonio and Austin to private retail providers.
Abbott has called CPS Energy and Austin Energy monopolies, arguing that competition could give residents access to lower electricity prices. His proposal would require approval from the Texas Legislature, which is expected to consider the issue during its 2027 session.
Hinojosa told the Observer that she believes Abbott is attempting to redirect public anger over rising electricity bills while creating additional profit opportunities for private companies connected to his political supporters. She described the proposal as being about “enriching his donors.”
CPS Energy officials have disputed Abbott’s argument that retail competition would automatically produce lower bills. They have also warned that changing the utility’s business model could redirect money currently kept in San Antonio to private investors elsewhere.
CPS Energy transfers roughly 14% of its revenue to the City of San Antonio, providing more than $500 million annually for police, fire protection, parks, libraries and other municipal services.
San Antonio Region Faces Its Own Data Center Expansion
The debate is already reaching communities around San Antonio. CyrusOne is developing a $500 million data center near Castroville, while Microsoft and other technology companies have expanded their presence across western Bexar and Medina counties.
Those projects promise substantial construction investment and additions to local tax bases, but they also raise questions about power generation, transmission capacity, water consumption and the relatively small number of permanent jobs many data centers create after construction.
Public opposition is no longer limited to one political party. An Annenberg Public Policy Center survey found that 61% of Americans oppose a new data center in their area, up from 49% in March. Opposition included 69% of Democrats, 54% of Republicans and 53% of independents.
President Donald Trump has publicly disagreed with Abbott’s harder line, arguing that Texas would be making a mistake by turning away an industry that could eventually become larger than oil.
For Texas voters, however, the fight is increasingly about who benefits from the AI boom — and who will be left paying for the electricity, water and infrastructure required to sustain it.
