After the Fed: Texas Economy
Data center construction revealed in stats
The Texas economy experienced a relative slowdown in 2025 to 2.6% GDP growth, and near-zero job growth. However, the state is positioned for recovery in 2026 driven by AI investment, data center construction, and improved fiscal conditions. Some of the key challenges include labor constraints, low oil prices, and trade policy uncertainty.
Extrapolating from 2025 data, two energy markets will be major recipients of Big Tech’s massive AI spend—of the $600 billion capex forecast for 2026. They are PJM, to include Northern Virginia, and Texas—big data center markets. Louisiana was the next largest winner of cap ex in 2025 (likely Meta’s Hyperion campus). The evidence of the spending was confirmed from a Federal Reserve Bank of Dallas “Texas Economy Outlook” of Feb. 6th. Recent construction activity revealed more real evidence of cap ex trickling through the economy.
At the recent NAPE Expo energy and land industry summit, the data center build out was top of mind in many presentations. Sarp Ozkan of Enverus noted that natural gas is really the go-to source over the next five years, until small modular reactors (SMRs) surface, possibly, in the five years after. I gleaned that the oil and gas industry is best-positioned to meet the power needs ahead, but new approaches and technological know-how will need to be applied. The slow pace of interconnection queues to bring data centers online will also create a measured pace of development. This flies in the face of the speed-to-market that is much desired by hyperscalers and other developers. But I am noticing workarounds and ingenuity.
It is relatively easy to generalize energy demand needs, the timing of the build out and the obstacles. Harder is identifying the approaches that are working and the players that are meeting the challenges. This is like finding needles in haystacks. More on that later.
Specific to the AI infrastructure and energy space, new data is emerging. For context, in 2025, the top four hyperscalers’ capex— Microsoft, Amazon, Google, Meta— was in the $350 billion range, and $220 billion the year before. This becomes important when considering the following numbers which are trickling through the Texas economy.
More color on the data center build out follows:
