Trump heads toward unlikely clash with close ally over future of multibillion-dollar industry

DALLAS — The artificial intelligence boom is fueling a data center rush in Texas and opening a rare divide between President Donald Trump and one of his closest political allies — Republican Gov. Greg Abbott.

Projects bringing billions of dollars in investment to Texas also create enormous demand for electricity, raising questions over who will be on the hook to pay for potential power grid impacts. Abbott has moved to address those concerns, directing regulators to ensure data centers cover the infrastructure costs needed to serve them and calling on developers to add their own power generation rather than shift costs onto Texas residents.

Trump isn't happy with Abbott's approach and called the Lone Star State's stance toward data centers a "mistake," pointing to the economic investment the projects can bring to communities willing to host them.

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The president has made energy dominance and U.S. leadership in artificial intelligence central pillars of his second term.

"For Texas to say no to data centers is a mistake in the sense that it could be bigger than oil," Trump told Punchbowl News in an interview published Friday.

"Data centers could be bigger than oil," he predicted.

Texas has become a focal point of that debate as soaring demand for the computing power behind artificial intelligence and cloud services drives a wave of data center development across the state.

Neither the White House nor Abbott's office responded to Fox News Digital's request for comment on the departure between the two on data centers.

Dallas now ranks as the world’s No. 1 primary data center market, according to Cushman & Wakefield’s 2026 Global Data Center Market Comparison. The ranking underscores the Lone Star State's rapid rise as companies seek the land and electricity needed to support artificial intelligence.

The firm said the state is growing at a pace that could eventually rival or surpass Virginia, currently the world’s largest data center market by operating capacity.

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That growth, however, has intensified scrutiny of the strain large-scale facilities place on Texas' power system.

Balaji Tammabattula, chief operating officer of BaRupOn, which is developing a data center campus in Texas, told Fox News Digital that Trump's recent pushback on the governor was "really helpful." He said companies have already committed significant amounts of money to projects in Texas based in part on the state's historically business-friendly environment.

"A lot of companies made huge investments into Texas, and now all of a sudden he [Abbott] changed his stance," Tammabattula said. "That, I think, could be a problematic situation going forward."

Tammabattula explained that BaRupOn's 700-acre campus is somewhat insulated from the growing fight over grid access because its Houston-area campus is being built to generate its own power rather than rely on the state's electric grid.

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Tammabattula said BaRupOn began building its own infrastructure, including natural gas pipelines and turbines, to create what he called an "islanded power campus."

"Even if we want to connect it to the grid, we don’t have a pathway for the next three years," he said.

That constraint could now work in BaRupOn’s favor as Texas pushes data centers to rely more heavily on their own power generation. Tammabattula said the company has advocated for on-site power generation, known as behind-the-meter power, for more than a year as a way to meet the enormous electricity demands of data centers without adding to the strain on the grid.

"For us, it definitely is beneficial because it proves what we’ve been trying to say for the last one and a half, two years," he said.

Tammabattula also acknowledged the concerns fueling opposition to the industry’s rapid expansion, particularly the possibility that the cost of supplying massive amounts of electricity to new facilities could fall on residents.

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The challenge for Texas is finding a way to accommodate an industry pouring billions of dollars into the state without leaving residents to shoulder the costs of the infrastructure needed to support it.

Tammabattula said the tension is unlikely to disappear as demand for data centers continues to grow.

"These data centers have to be built," he said. "Until an actual solution comes up, this is going to continue for the long term."

"And in my opinion, that has to come from the government."