Texas welcomed the AI boom. Now Abbott says data centers "dug their own grave"

Texas Gov. Greg Abbott delivered one of the starkest warnings yet from a Republican executive to the AI industry, telling ABC's Jonathan Karl that data center companies "dug their own grave" and deserve the backlash they're facing after failing to win community support.

Why it matters: Abbott is the latest governor to sharply change course on the AI data center boom he once enthusiastically courted as local opposition becomes a potent political force.

• Democratic Pennsylvania Gov. Josh Shapiro, who last year celebrated a $20 billion Amazon data center investment, imposed new restrictions this week.
• New York Gov. Kathy Hochul last month ordered a one-year moratorium on hyperscale data centers.

Catch up quick: Just last November, Abbott called Texas the "epicenter of AI development" as he joined Google to announce a $40 billion investment into three data center campuses.

• In June, however, Abbott directed state regulators to make data centers pay the full cost of the electrical infrastructure they require and called for phasing out tax incentives.
• Earlier this month, he ordered regulators to audit data centers seeking to connect to Texas' power grid before allowing the projects to move forward.

Zoom out: The backlash is quickly becoming a political problem for the AI industry.

• Axios' Alex Isenstadt scooped last week that the National Republican Senatorial Committee warned leading AI companies that voter anger over data centers was imperiling Republicans' chances of holding a critical Ohio Senate seat.

What he's saying: Abbott told Karl on ABC's "This Week" that the backlash stems partly from the sheer speed of the buildout and partly from developers moving into communities without first gaining support.

• "Gaining the support of people in local communities is essential," Abbott said.
• "They basically dug their own grave for the problem that's been caused for them," he continued. "And that's why they got the backlash they deserve."
• Last week, Abbott told Fox News Sunday that fewer than 10% of data center companies had responded to a state request for information needed to project future power demand.

The intrigue: Trump has taken aim at Abbott's approach, who said "for Texas to say no to data centers is a mistake" because the industry "could be bigger than oil."

• No one expected the problem to be red-state Republicans who suddenly realized they were at risk of losing an election over something voters vehemently opposed.

By the numbers: 61% of Americans now oppose construction of a new data center in their area, according to an Annenberg Public Policy Center survey last month, up from 49% in March.

• The opposition crosses party lines: 69% of Democrats, 54% of Republicans and 53% of independents oppose new data centers in their area.

Between the lines: For years, the biggest questions around the massive AI buildout were whether the technology would live up to the hype, whether companies could secure enough chips and electricity, and whether the economics of trillions in spending made sense.

• Now its most immediate constraint is whether voters will allow the physical infrastructure necessary to power the AI boom.
• Data centers bring enormous electricity demand, water use, transmission needs and industrial-scale construction into local communities.
• They also provide fewer permanent jobs than the usual warehousing and manufacturing deals that usually earn tax incentives.

State of play: Data center spending has become large enough to matter for the broader American economy and central to the effort to stay ahead in the global AI race.

• Texas is among the hottest data center markets, with developers initially attracted by the pro-business state that has ample supplies of natural gas and renewables, energy infrastructure, and lots of land.

The bottom line: If voter anger hardens into more moratoriums, slower permitting or abandoned projects, it could constrain the computing infrastructure AI companies are counting on and weaken one of the fastest-growing sources of U.S. investment.

• The industry — and the entire economy — face a brutal reckoning if the political tone doesn't change, quickly.