The announcement signaled the start of a rather lame 21st century arms race. Instead of who can make it to the moon first or build the bigger, deadlier bomb, this competition is nebulous even to those who consider themselves experts in the field. Whose AI can be faster, whose can be built cheaper, and what exactly — laypersons and tech geniuses both want to know — will the implications of widespread AI actually be?
The Stargate venture is funded by leading artificial intelligence companies OpenAI, SoftBank and Oracle, and is expected to drop $500 billion into the United States’ AI infrastructure over the next four years. $100 billion of that funding has already been deployed, and much of it is being funneled into the Lone Star State, where the data center industry, a crucial piece of the needed AI infrastructure, has become king.
“It's a very clear indication that the Trump administration sees the value of this type of technology, of AI, and what it can do and the transformational qualities of it,” Mel Morris, CEO of the artificial intelligence research group Corpora.ai, told the Observer. “$500 billion is a large sum of money, no question mark about that.”
Less than a month after Trump announced Stargate, France launched its own €110 billion AI investment in a direct response, President Emmanuel Macron said, to the U.S. effort.
The race is on, and Texas is set as ground zero.
The flagship Stargate campus is already under construction in Abilene. The data center is the size of New York City’s Central Park, and Bloomberg reports it could eventually run on 1.2 gigawatts of power all day, every day. That’s enough energy to power around 240,000 homes, according to data from the Electric Reliability Council of Texas (ERCOT).
Ten other centers are under development in Texas, and as many as 10 more could be on the way, OpenAI officials have said. More specific locations could be announced in the coming weeks. Once Texas’ Stargate stronghold is secured, the venture may begin building in other states, OpenAI’s chief global affairs officer, Chris Lehane, recently said on a call with reporters. Sixteen have expressed interest.
For the immediate future, Stargate is Texas’ boon and Texas’ problem. Already we might be falling behind.
“We can't [meet the projected energy demand caused by data centers], not with our current grid, but it doesn't mean we can't handle it eventually,” state Sen. Nathan Johnson said. “The question is can the construction of this additional, massive electrical load be carried out at the same pace as we build out our grid to be able to accommodate it? And can it be done in a fashion that doesn't compromise the rest of what we rely upon?”
The Wild West of Data Centers
You probably drive past a handful of data centers a day without knowing they’re there. They are sometimes interesting looking — like the glass and white-iron Equinix Infomart building off North Stemmons Freeway, which is rated as one of the most digitally connected data centers in the country.The vast majority, though, just look like unassuming warehouses. Interesting looking or not, the centers are almost always massive.
Data centers house rows and rows and floors and floors of servers and computing equipment that, in the case of AI-focused centers like Stargate’s, can train machine learning algorithms and handle the general demands that a model, such as ChatGPT, requires to run. The centers are also stocked with massive fans and cooling units that keep the equipment from overheating.
They are energy intensive and run 24/7 — a strain that has become worrisome for some state leaders in light of Texas’ dominance in securing the developments. According to a 2024 report from the state comptroller, Texas is home to 279 data centers, with 141 landing in Dallas or its surrounding suburbs. Data centers in the Dallas area used the second most power in the country last year, at 591 MW.
Luke Metzger, executive director of the Environment Texas Research & Policy Center, said Texas has been an appealing landing spot for data centers because of cheap land, cheap energy and generous state incentives like the Chapter 312 program, which allows local governments to give massive tax exemptions to developers for 10-year periods.
In a forecast presented to the state Senate Committee on Business and Commerce, ERCOT CEO Pablo Vegas told legislators that forecasts show Texas’ energy demand doubling in the next five or six years. The booming AI and cryptocurrency data center industry accounts for over half of that increase, while anticipated population growth and increasingly extreme weather events also factor in.
The latest worst-case scenario figures — which Vegas presented to the Texas Public Utility Commission in February — paint an even more dire picture. ERCOT said Texas could begin coming up short on power as soon as 2027. There is an 8.3% supply shortfall predicted for peak demand periods, and that shortage grows to 32.4% by the summer of 2029.
“I don't know of a precedent that sees such a dramatic growth in such a short period of time. Basically since World War II, our demand for electricity has risen quite slowly, maybe a few percentage points a year, and now we're talking about doubling the demand in just a five or six year period,” Metzger said. “There's, I think, real risks then for grid reliability.”
Metzger was relieved to see ERCOT’s announcement cause a stir amongst politicians, although, he admits, that seems to have died down in recent months as other issues have taken priority during the legislative session.
If ERCOT’s prediction from last summer of six years of grid reliability holds true, state legislators have at most three legislative sessions to come up with a plan to reinforce the state’s electric grid.
“Texans will ultimately pay the price,” Lt. Gov. Dan Patrick warned on X shortly after ERCOT issued the dire energy demand forecast. “We want data centers, but it can’t be the Wild Wild West of data centers and crypto miners crashing our grid and turning the lights off.”
Patrick has since told the Texas Tribune he supports the Stargate initiative and believes Texas should be the “world leader in AI, data center and crypto. The key is to ensure they have the power they need without a major impact to our electrical grid.
“The industries understand that and they are working on solutions,” he said.
North Texans might prepare to see 3,000 more miles of powerlines to handle the energy demands of data centers.
Brandon Bell/Getty Images
Paying the Price in More Ways Than One
Even as Dallas stands as a hub for data center development, Sen. Johnson says it’s a topic he rarely hears about from his constituents.“I don’t think a lot of people are wondering if a data center is going to be built in their town or the next town over, but it will affect everybody,” Johnson said. “It's not on everyone's mind, like transgender sports and democracy and January 6th. It's just nowhere near as sexy as the kind of stuff that stirs our passions.”
North Texans might start paying more attention to the data center boom once they see the price tag it’s expected to bring.
A new report from ERCOT predicts that more than 3,000 miles of power lines will need to be built to accommodate the increasing energy demand. That infrastructure alone is expected to cost around $30 billion, The Houston Chronicle reports, and those costs will likely be levied at consumers and small businesses.
Because transmission lines are a public good, Texas residents can expect to see that $30 billion project reflected in their own energy bills over the coming decade. Already, data centers benefit — and in some cases profit — from inexpensive energy costs and incentive programs.
According to Department of Energy data, Texas residents paid, on average, 15 cents per kilowatt-hour in 2024. Industrial consumers, the category data centers fall under, paid only 6 cents per kilowatt-hour, despite creating the lion’s share of the demand growth over the last decade.
Some data centers do have the ability to shut down during times the grid is strained; ERCOT has partnered with industrial consumers through the Responsive Reserve Service, which pays data centers to cease operations during high-use times to prevent blackouts. According to The New York Times, this program has resulted in ERCOT paying five industrial energy consumers at least $60 million since 2020. In most cases, the facilities ceased operations for only a few hours.
ERCOT has indicated some interest in expanding the program to residential consumers.
Thomas Gleeson, chairman of the Public Utility Commission of Texas, told Bloomberg last year that the energy demand fix could be simple: Rather than having every data center ask to plug into Texas’ already wobbly grid, the centers need to begin supplying their own energy or find alternative sources, he said.
This could be a major win for natural gas plants, especially in Texas where construction projects in the Dallas area have access to Permian Basin gas. According to a study by S&P Global Ratings, data center development is expected to help bump the natural gas industry’s share of Texas energy production from 30.3% in 2025 to 34.3% 2035.
In response to last summer’s grid projections, Abbott and Patrick pledged to double the state’s $5 billion energy fund, which offers low-interest loans as an incentive for gas-fueled power plant developers. The fund also offers cash bonuses to existing plants that opt into connecting to the state grid.
Gas power plants are better for the environment than coal or crude oil but more harmful than solar or wind energy, and Metzger is concerned what effect a natural gas renaissance could have on Texas’ carbon footprint. While large-scale data center drivers such as Amazon, Google, Meta and Microsoft have made pledges to reduce carbon emissions by 2030, the S&P study predicts most companies will be willing to quietly accept gas plants as a backup energy source.
Also worrying for state leaders is the effect data centers could have on Texas’ water supply, especially during drought periods.
In a conversation hosted by the Dallas Citizens Council last December, Texas Gov. Greg Abbott said the current legislative session may be the “most successful session we’ve ever had” on water issues. Shoring up the state’s water supply would be a critical endeavor, Abbott said, to ensure Texas a smooth path forward with the artificial intelligence data center industry.
“[Data centers] require cooling and the cooling typically is not air cooling, it's water cooling that is needed to get these things to function and to function effectively,” Corpora.ai’s Morris said. “And there are issues.”
In 2023, protests broke out across Uruguay as leaders welcomed a 72-acre Google data center that required two million gallons of water daily to cool its servers, amid a crippling nationwide drought so severe public water authorities began adding brackish estuary water to the public drinking supply, giving it a salty taste. That’s equivalent to the water demand of 55,000 people, local experts estimate.
By 2027, the global water demand from AI data centers is estimated to hit 4.2 – 6.6 billion cubic meters; that’s half the annual freshwater usage of the entire United Kingdom, equivalent to 2.4-million Olympic sized pools.
“We're not against data centers or against AI, there's a lot of uses that are beneficial to society. They're using AI to develop or identify new drugs to treat diseases and things. So there's definitely a lot of benefits,” Metzger said. “But given the enormous strain that they have on our electric grid, our water supplies, our environment, I do think it's worth asking the questions, do we need all of these?”
Swings at Regulation
Although the data center regulation talk hasn’t overwhelmed the legislative session as Metzger had hoped, it will likely become a more prominent talking point in the coming months.(Our lawmakers first have to work through the critical things, like education vouchers and ending the sale of THC products.)
The Texas Senate Business and Commerce Committee, which Johnson sits on, has focused on several of the key complaints levied against data center and crypto mining facilities. In a recommendation report submitted to the lieutenant governor in December, the committee suggested industrial energy consumers be required to “offset their impact on the grid by adding on-site power systems or participating in programs to curtail electricity usage during peak demand periods.”
The same recommendation report keyed in on ERCOT’s Responsive Reserve Service program, and urged the state to “consider closing loopholes that allow these companies to leverage financial perks for private benefit.” The committee also encouraged the Legislature to consider measures that would protect small consumers from paying an unfair portion of energy costs by introducing a cap on transmission costs.
They’re small steps, and it’s unclear what impact they would have on an initiative like Stargate, where details have been few and far between. Then there’s ERCOT, whose forecasts are just that; the energy supplier could be overstating the problem, and the strain on the grid may not be as drastic as has been predicted. But it could be.
Johnson feels optimistic about what the Stargate endeavor could mean for North Texas, if handled correctly, although he’s also fairly skeptical of the “arrogance and ignorance of people who rush in.”
“Just because a bunch of wealthy tech people say they're going to drop $100 billion in Texas doesn't mean it's going to happen. And it doesn't mean it will happen at the pace they want it to or in the manner that they envision. Industry hasn't always been the best at forecasting the consequences of their actions to everyone and everything around them,” Johnson said. “I think there's great promise here, but there's also a lot of bluster and bullshit.”
