The Download: Texas’s fragile AI boom and energy policy shifts

Texas, the fastest-growing data center market in the US and the site of Big Tech's largest AI buildouts, may lose that status after midterm results that put data centers at the center of the campaign. Democrat James Talarico won the US Senate seat, Gina Hinojosa won the governor's race, and Democrats took control of the Texas House for the first time in 24 years.

The swings pose a problem for hyperscalers with ambitious plans in the state, and they add to a broader anxiety that America's AI buildout could stall. The Texas results rattled Elon Musk and SpaceX, and Meta has said building data centers has become much harder. Opposition was widespread elsewhere: voters rejected data center measures in 40 of 41 midterm ballot measures, and six cities voted to ban data centers outright.

Nationally, Democrats now control both the House and the Senate, though major federal climate and energy legislation is unlikely while Trump remains president — he can still veto bills Congress passes. The real leverage sits at the state and local level, where results will shape the state grid, data center development, renewable energy and greenhouse gas emissions.

A separate legislative vehicle could loosen the pipeline for all of it. On November 9 the Senate is set to vote on the Bipartisan American Affordability and Jobs Act (BAAJA), a bill designed to cut red tape and speed up energy infrastructure approval by overhauling a slow, complicated permitting process. Some environmental groups oppose the bill, or parts of it, setting up a fight over the trade-offs.

The midterm fallout extends beyond infrastructure. Democrats are preparing to investigate Elon Musk, whose firms have won more than $16 billion in government contracts, and analysts suggest the results could also boost China's AI ambitions. China, meanwhile, is tightening its grip on talent and dealmaking — blocking SoftBank's bid for ABB Robotics, having chipmakers poach engineers from foreign rivals, and drawing a star mathematician away from the US to develop AI.

What to watch: whether Texas Democrats deliver on campaign promises to constrain data centers, how hyperscalers shift site selections in response, and whether BAAJA clears the Senate and, with it, faster approvals for the power projects the AI buildout depends on.