Texas has emerged as the undisputed leader in data center expansion, attracting unprecedented investment from tech giants and establishing itself as the epicenter of AI infrastructure development. The numbers tell a compelling story: Google just announced a $40 billion investment in three new Texas data centers through 2027, OpenAI’s Project Stargate is deploying multiple facilities across the state with a $500 billion total commitment, and the Dallas-Fort Worth region alone now hosts 141 of the state’s 279 operational data centers. This isn’t just growth—it’s a fundamental transformation of Texas into the nation’s digital infrastructure hub.
Why Texas? The Perfect Storm of Advantages
Several factors have converged to make Texas the premier destination for data center development. Understanding these advantages helps explain why companies are choosing Texas over competing locations and what this means for the infrastructure providers who support these facilities.
Power Availability and Competitive Energy Costs
Texas offers something increasingly rare: abundant power capacity and the regulatory framework to deliver it quickly. The state’s deregulated energy market and direct access to natural gas resources provide competitive electricity rates that significantly impact operational expenses. When cooling systems alone consume 40% of a data center’s total energy usage, power costs directly determine long-term profitability.
The Electric Reliability Council of Texas manages 90% of the state’s power grid, giving developers a single point of contact for grid interconnection rather than navigating multiple utility territories. While ERCOT now faces unprecedented demand—tracking 205 gigawatts of large load interconnection requests, with over 70% from data centers—the state is actively working to accommodate this growth through infrastructure expansion and innovative grid management strategies.
Strategic Geographic Location
Texas provides optimal latency for serving major population centers across the United States. The Dallas-Fort Worth metroplex sits at the geographic center of the country, while Houston serves as a major fiber landing point connecting to Latin America. This geographic positioning reduces network latency for end users while providing redundant connectivity through multiple fiber routes.
The state’s location also provides access to diverse power generation sources. West Texas benefits from abundant wind and solar resources, while the Gulf Coast offers natural gas infrastructure and potential nuclear development sites. This diversity enables data center operators to pursue various energy strategies, from renewable power purchase agreements to on-site generation.
Business-Friendly Regulatory Environment
Texas has cultivated a reputation for regulatory efficiency and pro-business policies. Data centers meeting specific investment thresholds can access substantial tax incentives, including sales tax exemptions on essential equipment and electricity. Under House Bill 1223, qualifying data centers—those investing at least $200 million, spanning 100,000 square feet or more, and creating at least 20 jobs at above-average wages—receive 100% exemption from state sales tax on computers, electrical equipment, cooling systems, power infrastructure, and software.
Local governments can also provide property tax abatements for up to 10 years under Chapter 312 of the Texas Tax Code, further reducing total project costs. These incentives, combined with Texas’s absence of state income tax, create significant financial advantages compared to competing locations.
Skilled Workforce and Infrastructure
The state’s major metropolitan areas offer deep talent pools with expertise in technology, engineering, and industrial operations. The Dallas-Fort Worth area, Austin, Houston, and San Antonio each host major universities producing graduates in computer science, electrical engineering, and related fields. This workforce availability supports both the construction phase and ongoing operations of large-scale facilities.
Texas also benefits from established industrial infrastructure including transportation networks, construction capacity, and supply chains for specialized equipment. The state’s experience hosting energy-intensive industries like petrochemical manufacturing and oil refining has created an ecosystem of contractors, engineers, and support services familiar with complex industrial systems.
The Grid Challenge: Managing Unprecedented Demand Growth
The rapid expansion of data centers in Texas presents both opportunities and challenges. ERCOT projects that electricity demand could reach 218 gigawatts by 2031—more than double the current peak demand record of 85.5 gigawatts set in August 2023. Data centers represent the single largest driver of this growth, accounting for an estimated 86 gigawatts of new demand.
This explosive growth is forcing grid operators to rethink traditional planning approaches. As Kristi Hobbs, ERCOT’s vice president of system planning and weatherization, explained at a recent Public Utility Commission meeting, “When you look at companies that want to come and consume more power than cities in a single location—it’s hard to forecast and plan for that in the future.”
The challenge isn’t just the total amount of power—it’s the concentration and urgency. Many large data center projects exceed one gigawatt per site, equivalent to half the power produced at Hoover Dam. Additionally, requests from large energy users to be online by 2030 have risen 227% since last year, compressing timelines that traditionally took decades.
ERCOT is responding with several strategies. The grid operator now offers expedited interconnection for large energy users willing to commit to reducing power consumption during grid strain. The state is investing over $30 billion in new transmission infrastructure, including 765-kV lines that can carry more than twice the voltage of current systems. New generation capacity is being added rapidly, with solar power expected to more than double between 2024 and 2029 and battery storage systems projected to triple during the same period.
The Critical Cooling Infrastructure Gap
While securing adequate power represents one challenge, managing the heat generated by modern computing workloads presents another equally critical issue. This is where specialized industrial cooling expertise becomes essential—and where the market opportunity exists for companies with proven capabilities.
The Scale of the Cooling Challenge
Data centers require continuous, reliable cooling to maintain optimal operating temperatures for computing equipment. Traditional air-based cooling systems are reaching their physical limits as AI workloads push power densities to unprecedented levels. A single AI training rack can generate heat loads requiring specialized cooling solutions that go far beyond conventional HVAC systems.
The International Energy Agency projects that energy demand from AI workloads could increase tenfold by 2026 compared to 2023. This growth directly translates to increased cooling requirements. Some large data centers can consume as much electricity as medium-sized power plants—and a significant portion of that power goes directly to cooling systems.
The Transition to Advanced Cooling Technologies
The industry is undergoing a fundamental shift from air to liquid cooling technologies. According to industry analysts, 22% of data centers now use liquid cooling techniques, and this percentage is expanding rapidly as operators recognize that traditional cooling approaches cannot support next-generation computing densities.
Google’s implementation of liquid-cooled Tensor Processing Unit pods achieved a fourfold increase in compute density while maintaining system reliability. Microsoft announced that all new data center designs will utilize advanced liquid cooling systems, signaling the technology’s transition from experimental to essential. These aren’t incremental improvements—they represent fundamental changes in thermal management architecture.
Lambda, a leading AI developer cloud provider, recently selected a liquid-cooled facility in Plano, Texas for its operations, demonstrating how cooling infrastructure now drives site selection decisions. The facility, developed by Aligned Data Centers, represents the type of purpose-built infrastructure required to support modern AI workloads.
Multiple Cooling Approaches Emerging
The transition to liquid cooling isn’t following a single path. Direct-to-chip cooling delivers coolant directly to heat-generating components, providing targeted thermal management at the source. Immersion cooling submerges entire servers in dielectric fluid, eliminating the need for traditional fans and enabling nearly 100% heat recapture. Rear door heat exchangers provide air-assisted liquid cooling that can be retrofitted into existing facilities without major infrastructure overhauls.
Each approach offers distinct advantages depending on facility requirements, existing infrastructure, and workload characteristics. Data center operators need partners who understand these technologies and can design, implement, and maintain systems that deliver reliable performance under continuous operation.
Why Industrial Refrigeration Expertise Matters
The parallels between industrial refrigeration and data center cooling run deeper than many realize. Both industries demand:
Continuous, Reliable Operation: Just as a cold storage facility cannot tolerate temperature fluctuations that compromise product integrity, data centers cannot accept cooling failures that risk equipment damage and service interruptions. Both require 24/7/365 reliability with rapid emergency response capabilities.
Precision Temperature Control: Industrial refrigeration systems maintain tight temperature tolerances across large facilities, similar to the requirements for keeping server rooms within optimal operating ranges. The engineering principles that ensure consistent temperatures through Texas summers translate directly to data center thermal management.
Complex System Design: Both environments involve sophisticated piping systems, pumping infrastructure, heat exchange equipment, and control systems. The design considerations for refrigerant distribution in a cold storage facility mirror many aspects of coolant distribution in liquid-cooled data centers.
Preventive Maintenance Culture: In both industries, preventing failures is far more cost-effective than responding to emergencies. Regular maintenance, system monitoring, and proactive component replacement are essential to avoiding catastrophic downtime that can cost millions per hour.
Energy Efficiency Focus: Reducing power consumption while maintaining performance has always been critical in industrial refrigeration, where energy represents a major operating expense. This expertise directly applies to data centers, where improving cooling efficiency can reduce total facility power consumption by 10-20% or more.
Regional Opportunities Across Texas
The data center expansion isn’t limited to traditional tech hubs. Projects are spreading across the state, creating opportunities for infrastructure providers in multiple regions:
Dallas-Fort Worth Metroplex: With 141 data centers, the DFW area represents the state’s largest concentration. New projects continue launching, including the Comanche Circle development spanning 2,600 acres with potential capacity reaching 5 gigawatts. Proximity to Comanche Peak nuclear plant provides access to reliable baseload power.
West Texas and Panhandle: Google’s new Armstrong County and Haskell County facilities represent the expansion into areas with abundant land, available power, and favorable conditions for renewable energy integration. These regions offer lower land costs while still providing access to necessary infrastructure.
Austin and Central Texas: The state capital continues attracting tech companies and data center investment, with multiple projects in development. The region benefits from educated workforce, established tech ecosystem, and central location within the state.
Houston and Gulf Coast: The energy corridor provides unique advantages including access to natural gas infrastructure, industrial construction expertise, and fiber connectivity to Latin America. The region’s experience with large-scale industrial projects translates well to hyperscale data center construction.
San Antonio and South Texas: Emerging as a data center location with lower land costs, available power, and proximity to major fiber routes. The region offers opportunities for facilities serving regional markets while maintaining competitive operational costs.
The Path Forward: Positioning for Growth
The data center boom in Texas represents more than just construction activity—it signals a sustained transformation requiring specialized infrastructure partners. Several trends will shape the market over the next five years:
Continued Investment Growth: With Google’s $40 billion commitment, Project Stargate’s expansion, and hundreds of additional projects in various stages of development, investment will continue flowing into Texas data center infrastructure for years to come.
Cooling Technology Evolution: The transition to liquid cooling will accelerate as computing densities increase and traditional air cooling reaches its limits. Facilities will require retrofits and upgrades, creating opportunities beyond new construction.
Energy Efficiency Mandates: As power demand strains the grid, regulators and operators will increasingly focus on efficiency. Cooling systems that reduce total power consumption will become differentiators rather than nice-to-have features.
Maintenance and Operational Support: The growing installed base of data centers will require ongoing maintenance, emergency repairs, system optimization, and capacity expansions. Long-term service relationships will become as valuable as initial construction contracts.
Hybrid Cooling Solutions: Many facilities will deploy multiple cooling technologies depending on workload characteristics and existing infrastructure. Partners who can design and support complex, multi-technology cooling architectures will have competitive advantages.
Why Now? The Window of Opportunity
The data center expansion in Texas isn’t speculative—it’s happening right now with committed capital and construction schedules. ERCOT’s interconnection queue shows 205 gigawatts of requests, with 70% from data centers. These aren’t merely expressions of interest; they represent actual projects with financing, site selection, and development timelines.
The cooling infrastructure required to support these facilities represents a substantial market opportunity. Every rack of servers, every GPU cluster, every AI training facility needs reliable thermal management. Companies with proven expertise in industrial cooling systems—particularly those with experience in mission-critical applications requiring continuous operation—are uniquely positioned to capture this market.
Texas offers the perfect combination: explosive growth, favorable business conditions, accessible markets, and increasing recognition that cooling infrastructure determines whether facilities succeed or fail. The question isn’t whether data centers will continue expanding in Texas—the investment commitments ensure they will. The question is which infrastructure providers will emerge as trusted partners in addressing the critical cooling challenges that enable this expansion.
For companies with deep industrial refrigeration expertise based in Texas, particularly in the Dallas-Fort Worth area, the opportunity is immediate and local. The next generation of digital infrastructure is being built right now, and it needs partners who understand that reliable cooling isn’t optional—it’s mission-critical.
Sources and Further Reading
- Texas Tribune – Google Data Centers Totaling $40 Billion Coming to Texas
- Bloomberg – Google to Invest $40 Billion in New Data Centers in Texas
- OpenAI – OpenAI, Oracle, and SoftBank Expand Stargate with Five New AI Data Center Sites
- Texas Tribune – Data Centers Are Booming in Texas. What Does That Mean for the Grid?
- Texas Tribune – Data Center Explosion Creates Planning Problems for Texas
- Data Center Dynamics – ERCOT: Electricity Demand in Texas Set to Soar to 218GW by 2031
- POWWR – Data Center Demand Growth in ERCOT Continues to Surge
- Dallas News – Data Centers Drive ERCOT’s Massive Power Demand Forecast
- Black Ridge Research – Texas Data Centers 2025: Top Upcoming Hyperscale Projects
- Stream Data Centers – Overview of Texas State Data Center Tax Incentives
- AbitOs – Tax Incentives for Building and Operating Data Centers
- Texas Comptroller – State Sales Tax Exemption for Qualified Data Centers
- Data Center Frontier – Liquid Cooling Comes to a Boil: 2025 Midpoint Analysis
