Texas is one of the nation's great economic bright spots. Part of the reason for that is that Texas, most recently under the administration of Governor Greg Abbott, has made sure it's an attractive place to set up business. As evidence, we might note that the Lone Star State is a common destination for the productive people fleeing increasingly business-hostile states like California, New York, and New Jersey, as part of the Great Sorting.
Now, though, Governor Abbott is headed for a disagreement with one of his key allies, President Donald Trump. The issue? Data centers, which are looking to Texas as a place to set up shop. Governor Abbott is pushing for caution through regulation, while President Trump is advocating a full-steam-ahead approach.
The artificial intelligence boom is fueling a data center rush in Texas and opening a rare divide between President Donald Trump and one of his closest political allies — Republican Gov. Greg Abbott.
Projects bringing billions of dollars in investment to Texas also create enormous demand for electricity, raising questions over who will be on the hook to pay for potential power grid impacts. Abbott has moved to address those concerns, directing regulators to ensure data centers cover the infrastructure costs needed to serve them and calling on developers to add their own power generation rather than shift costs onto Texas residents.
Trump isn't happy with Abbott's approach and called the Lone Star State's stance toward data centers a "mistake," pointing to the economic investment the projects can bring to communities willing to host them.
While Governor Abbott's concerns are well-founded, the fact is that artificial intelligence, or AI, is the next big thing. It's not going away, and the data centers that require it are going to be built somewhere. The electricity that powers them is going to have to come from somewhere, as well. President Trump has made energy a keystone issue in his presidency, and Governor Abbott is looking to ensure that the Texas grid won't get overwhelmed.
The president has made energy dominance and U.S. leadership in artificial intelligence central pillars of his second term.
"For Texas to say no to data centers is a mistake in the sense that it could be bigger than oil," Trump told Punchbowl News in an interview published Friday.
"Data centers could be bigger than oil," he predicted.
Data centers will be big, yes, and they will be energy-hungry. But Texas's grid has issues as well, as we learned in the great blackouts in the winter of 2021. So, both men have some valid points here; Governor Abbott is taking steps to ensure Texas's grid doesn't get overwhelmed, while President Trump is concerned about keeping the United States on the crest of the AI wave. Both men are operating within their wheelhouses.
The answer to the electrical grid problem would seem an obvious one: Small modular reactors. We solve today's problems with tomorrow's technology, and small modular reactors are part of that energy future. That seems to be one of Governor Abbott's priorities when he calls on the companies setting up these server farms to generate their own electricity rather than straining the grid even further.
The answer to the cooling problem is another concern. These big data centers, which are essentially giant server farms, require a lot of water for cooling, at least for the current technology. Now that is something that much of Texas is a little short on.
Governor Abbott's cautions aside, Texas is already seeing a boom in data center development.
Dallas now ranks as the world’s No. 1 primary data center market, according to Cushman & Wakefield’s 2026 Global Data Center Market Comparison. The ranking underscores the Lone Star State's rapid rise as companies seek the land and electricity needed to support artificial intelligence.
The firm said the state is growing at a pace that could eventually rival or surpass Virginia, currently the world’s largest data center market by operating capacity.
Maybe President Trump and Governor Abbott will be able to have their AI cake and eat it, too. As for the long term: Maybe Elon Musk has the right idea here: Data centers in space.
Editor’s Note: Thanks to President Trump’s leadership and bold policies, America’s economy is back on track.
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