US President Donald Trump’s ambitious plan to expand AI infrastructure might face major setbacks as the Republican-controlled Texas statehouse is set to pass laws that may weigh on data center development.

This comes as the Trump administration announced a major joint venture known as Stargate, meant to develop 20 data centers to provide computing power for AI as part of initiatives to boost the country’s AI landscape.

Texas will place a stumbling block on Trump’s plans

The companies behind the Stargate initiative, OpenAI, Oracle, SoftBank, and MGX, an investor backed by the United Arab Emirates picked Texas for its first data center due to its more relaxed regulation and pre-existing energy infrastructure. These companies together pledged up to $500 billion.

The initiative should also see the US compete with rivals like China in the competitive AI race.

However, according to The Guardian, the planned initiatives set to support Trump’s AI agenda may face serious headwinds on the back of Texas legislation SB6. The bill proposes some regulatory measures that include a half-year review process together with an already existing 6 to 18 months of evaluation with the goal of protecting its own power grid in the face of storms.

According to The Guardian, the effects of the proposed bill are two-pronged. Firstly, this may result in a 24-month approval process. Secondly, the requirement to pay extra fees to the Texas grid operator and install backup generators will add to construction costs.

As a result, this could eventually force tech firms to scale back the planned construction of data centers in Texas, as per analysts’ projections.

This comes as Stargate has already started building its first 10 data centers in Abilene, Texas, although it is unclear if the next set of 10 would be subject to the bill.

Firms might totally shelve projects

Analysts are of the view that if tech firms fail to develop in Texas, they may not build the data centers at all. And if this happens, this will directly weigh on Trump’s plans. While other states, from Wyoming to Wisconsin to Tennessee, have made efforts towards attracting similar projects, they are not as attractive as Texas as they lack the infrastructure.

“These heavy-handed mandates risk stifling investment on exactly the infrastructure needed for Trump’s AI initiative,” said Texas-based Vance Ginn, who was the associate director of economic policy at the White House Office of Management and Budget during Trump’s first term.

The bill, which has already passed the Texas senate is meant to avoid a repeat of the effects of the Winter Storm Uri in 2021, which plunged people into darkness and left many without heat. The storm which resulted in the loss of 246 human lives reportedly exposed the reliability issues with state energy grid.

Texas Lieutenant Governor Dan Patrick, however, said the SB6 would support Trump’s ambitious plan.

“Senate Bill 6 actually ensures President Trump’s Stargate Plan is a success,” he said in an emailed statement.

“We have made clear lockstep with President on his goal to make America number one, and dominate China on AI, data centers and cryptocurrency.”

Patrick.

Patrick added that the tech firms are aware of the need to ensure they meet their power needs.

Despite Patrick’s assurances, prospects are still high for regulatory challenges affecting Trump’s plans. According to The Guardian, apart from the regulatory hurdles, there is also a global slowdown in computing infrastructure development and additional macroeconomic uncertainty coming from additional construction costs that are related to Trump’s tariff plan. These may have far-reaching consequences.

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