The Blue Wave May Not Stop Musk’s Texas Data Center Ambitions

Elon Musk moved early to build AI data centers in Tennessee and Mississippi and reaped the rewards. Later, he began working on ambitious plans to open SpaceX data centers in Texas, following on the heels of OpenAI and others that are farther along in the state. Democrat Gina Hinojosa’s surprise election as governor this week could delay parts of Musk’s projects, though, even if it doesn’t derail them completely.

New details are emerging on bold data center plans from Musk’s SpaceX that could face a hard look from Hinojosa. Public records, job listings and rapidly rising steel structures with gas turbines parked beside them suggest SpaceX has begun building a multigigawatt “Starbase supercomputer”—the term used in one SpaceX job post—in its expanding City of Starbase. That’s the sprawling SpaceX property on the Texas-Mexico border in the Rio Grande Valley from which it launches its gigantic Starship rocket.

Musk has also made previously unreported down payments to secure as much as a gigawatt of floating power at the nearby Port of Brownsville from Turkish modular power provider and shipbuilder Karpowership, according to a person familiar with the financing discussions.

SpaceX is also preparing to use 700 to 800 megawatts of grid-connected power at its existing satellite manufacturing site in Bastrop, Texas, near Austin, according to utility board approvals for a substation and land deeds analyzed exclusively for The Information by Corey Trinetti, author of the Measured AI infrastructure newsletter. That could power another large AI data center or industrial operation, though its purpose remains undisclosed. Trinetti also cites a job listing for a Bastrop-based data center technician as another sign of SpaceX’s intentions for the location.

A county commission hearing in rural Grimes County revealed plans for data centers inside SpaceX’s Terafab chip foundry, about 80 miles from Houston. APR Energy, a turbine reseller SpaceX acquired earlier this year, had to build a data center in Pampa, in the Texas Panhandle, and placed mobile turbines there—another possible site for Musk.

Musk told SpaceX shareholders on Oct. 20 that he could build and energize 10 gigawatts of terrestrial data centers by 2027. These quiet preparations, along with his estimated $224 million in donations to Texas Republicans who lost in the midterms, appeared to be part of his blueprint for building at an unheard-of scale and speed in a state he had assumed would be friendly territory.

The odds of a quick SpaceX data center build-out are now much lower with Hinojosa taking office Jan. 19, 2027. During Hinojosa’s campaign, she vowed to block new data center approvals while lawmakers considered new safeguards. Hinojosa grew up in the Rio Grande Valley and campaigned explicitly against Musk and other billionaires “buying up Texans’ land, energy and resources.”

Data centers that generate their own power must also get pollution permits if they combust fossil fuels. Even before Tuesday’s election, Gov. Greg Abbott paused both grid connections and air permitting for data centers in the state, holding up the approval of SpaceX’s application during state audits that won’t conclude until December and could go longer. SpaceX filed an air permit application for on-site power at Starbase in September, but the application has been held up by the pause.

“Air permitting is the chokepoint,” says Christian Okoye, whose analysis for infrastructure risk analytics firm Occam Edge suggests a 444-acre Starbase parcel could support 1.5 to 2.6 gigawatts of on-site gas power.

Permitting delays pose two risks for SpaceX. First, they could cut future revenue: The company rented out immediately available cloud capacity to customers at a premium in Tennessee and Mississippi, but customers won’t pay such excess rates for capacity that’s ready much later. Second, SpaceX may have to pay for chips it recently agreed to lease from Apollo Global Management, with some coming in the first half of 2027, even if it lacks a powered data center ready to house them.

Selling AI compute to customers like Anthropic has grown by leaps and bounds to become SpaceX’s biggest business. During the third quarter, sales from what it calls its SI business unit—for super intelligence—nearly tripled from the prior quarter to $7.56 billion. Any serious disruption to that business could make it harder for Musk to pull off a merger of SpaceX and Tesla, a deal that board committees from both companies are considering.

Had Abbott won reelection, the Texas data center projects might have become the latest examples of Musk pushing past barriers that stop others. He has already moved to tackle one bottleneck by setting up a Texas turbine-blade castings foundry, which we revealed in August.

SpaceX and Karpowership, the floating power provider, did not immediately respond to requests for comment. Musk has warned of “guppy-level death” for cloud upstarts unable to compete at SpaceX’s level. But in posts this week, he acknowledged the election could make terrestrial data centers harder to build—and increase his interest in space-based computing.

Even so, Musk may pull off more than expected. My reporting suggests politicians are overestimating what a Democratic administration can or would block in pro-business Texas. Starbase controls its own zoning and can obtain low-cost municipal bond financing. SpaceX and Starbase rushed from August through October to annex land, negotiate water infrastructure and route underwater gas pipelines at the port. Those moves may have come just in time, unless opponents can reverse them.

Two nearby towns, including Brownsville, have just enacted temporary data center moratoriums, but Starbase succeeded at getting Brownsville to “disannex” land at a rowdy Aug. 29 meeting so Starbase could then annex it, just days before Brownsville began hearings to consider its moratorium.

The SpaceX and Tesla industrial complex that stretches across Texas amounts to hundreds of billions of dollars in investments in rocket launches, chip fabrication, solar module and battery manufacturing and data centers. Greater Brownsville is experiencing a historic boom, driven not only by SpaceX but also by new defense projects and data center companies including Fluidstack.

Just before the election, a coalition of local governments in Hinojosa’s home region, the Lower Rio Grande Valley, drafted a term sheet outlining what communities should demand from tech companies seeking to build data centers. Rather than reject the digital economy, the coalition wants companies to subsidize high-speed internet access, including for telehealth.

There is also a possibility that Musk and Hinojosa could find a compromise. The governor-elect struck a moderate tone this week, telling CNN on Nov. 5, “It is not that I hate data centers. I hate the way they are taking advantage of Texas.” She noted a Republican on her transition team and added: “We can have a strong working relationship with Elon Musk and his companies, but it has to be on our terms. It cannot be just running over the people of Texas.”

In the meantime, Abbott could conceivably lift parts of his permitting pause, giving some regulatory reviews a brief window to advance before Hinojosa takes office, says John K. Arnold, a Houston-based energy regulatory partner at Troutman Pepper Locke. But a case backlog and the holidays make securing an air permit before the new governor is sworn in an extreme long shot for Musk, and such a move would play poorly with voters. Abbott “could lift the pause, but the permitting process itself still requires significant input,” Arnold says.

Still, it’s not clear Hinojosa could block air permits, either. The commissioners at the Texas Commission on Environmental Quality were all recently appointed by Abbott and have several years left in their terms unless they resign, Arnold says. The agency paused air permits more in political deference to Abbott than because the governor had the legal authority to order it, he says. Hinojosa would face the same limit and, he expects, also not want to chase investments out of state. In Texas, “you can’t alienate people by being anti-business. It needs to be about business being done the right way,” he says.

SpaceX is nonetheless hedging its bets by unveiling a data center project in another state, where it continues to shock small communities with its audacious, rapidly unfolding plans. The day after the midterms, Riley Trettel, SpaceX’s head of energy and data center development, appeared at a town hall in rural Cochise County, Arizona, to explain that SpaceX wants to put as much as six gigawatts of data centers, battery storage and backup gas generation on a 747-acre site. It would draw power from a rural cooperative but also need new power generation and transmission upgrades, says the analytics firm Occam Edge.

Builders and financial partners I interviewed agreed Democratic victories will moderate but not stop the national AI build-out. “Data centers are happening,” says Mike Mathews, global digital infrastructure head at insurance broker Marsh. “Society and technology are pregnant with the next wave of data center demand, so the question is not whether data centers will be built, but where, when and under what conditions.”

Ann Davis Vaughan is the author of the AI Infrastructure newsletter for The Information. She is a former senior Wall Street Journal investigative reporter turned investment strategist who has tracked the energy, industrial and financial sectors for three decades.