To The Moon

The AI investment boom has a new challenge, and this time it is not about chip shortages, competition or expensive valuations.

It is about electricity, water, permits and where data centres can actually be built.

Texas has become one of the most important locations for America’s AI infrastructure expansion. However, the election of Democrat Gina Hinojosa as Texas governor has introduced fresh uncertainty for the industry.

Hinojosa has promised a moratorium on new data-centre approvals until stronger protections are established. Her concerns include electricity costs, water consumption, environmental impacts and giving local communities more control over development.

According to Reuters, Texas represents approximately 25% of planned US data-centre capacity.

That is a significant pipeline of potential investment now facing additional regulatory uncertainty.

For investors, the implications could extend well beyond Texas.

1. Why Texas matters so much to the AI industry

Building an AI data centre requires much more than purchasing thousands of GPUs.

Companies need:

• Reliable electricity supplies.

• Access to land and water.

• Grid connections and power infrastructure.

• Environmental and construction approvals.

• Significant upfront capital investment.

Texas has attracted major technology investments partly because of its available land, energy resources and business environment.

If approval processes become more restrictive, some projects could face delays or higher development costs.

Importantly, this does not necessarily mean AI demand will disappear. It could mean the infrastructure supporting that demand takes longer and costs more to deliver.

2. Which companies could face pressure?

$CoreWeave, Inc.(CRWV)$  

CoreWeave is particularly interesting because its business depends on expanding AI computing infrastructure.

Delays in data-centre construction could affect capacity expansion, customer delivery schedules and future revenue recognition.

Its debt commitments also make project timing and financing costs important considerations.

$SUPER MICRO COMPUTER INC(SMCI)$  

Super Micro supplies servers and infrastructure used in AI data centres.

If customers postpone infrastructure projects, demand for server systems could also be affected.

However, it is important to distinguish between a delay in construction and a permanent reduction in AI demand.

$Amazon.com(AMZN)$  

Amazon presents a different investment situation.

AWS is a major cloud computing business, and Amazon is investing heavily in AI infrastructure.

Regulatory restrictions could complicate some expansion plans, but its diversified e-commerce and cloud businesses provide multiple sources of revenue.

Interestingly, slower capital expenditure growth could eventually improve free cash flow if customer demand remains strong.

3. Could this create opportunities elsewhere?

I think investors should also consider companies that benefit from AI without depending entirely on new data-centre construction in Texas.

$Microsoft(MSFT)$  and $Alphabet(GOOGL)$  have established cloud businesses and diversified revenue streams.

NVIDIA (NVDA) and AMD remain important suppliers of AI computing technology, although their future growth depends partly on infrastructure investment continuing.

Energy infrastructure companies could also benefit from the longer-term demand for electricity.

The key distinction is that the AI industry has several layers, and regulatory restrictions will not affect every company in the same way.

4. An important distinction: Delayed projects versus cancelled projects

I would be careful about assuming that tighter Texas regulations will bring the AI investment boom to an end.

There are several possible outcomes:

• Projects could be delayed while companies wait for new approval requirements.

• Developers could move planned facilities to other states.

• Data-centre operators could invest in dedicated power generation and water-efficient cooling.

• Higher compliance costs could make some projects financially unattractive.

Each outcome would have different implications for technology suppliers, cloud providers and infrastructure developers.

The biggest risk may be a mismatch between the timing of infrastructure investment and the revenue companies expect to generate from it.

5. What I would watch as an investor

Rather than reacting to every headline, I would monitor three developments:

First: Texas regulatory decisions.

Will the proposed moratorium become policy, and how will existing projects be treated?

Second: Big Tech capital expenditure guidance.

Will Microsoft, Amazon, Alphabet and Meta maintain their investment plans, or start adjusting spending expectations?

Third: Infrastructure companies’ order books.

Companies such as CoreWeave and Super Micro could provide useful indications of whether project delays are translating into weaker customer demand.

My investment view

I still believe AI has significant long-term potential, but the market may be underestimating the practical challenges of building the infrastructure required to support it.

For the past few years, investors have focused heavily on GPU demand, AI models and cloud computing growth.

Now, electricity availability, construction approvals, financing and infrastructure costs are becoming equally important parts of the investment equation.

I would be more selective with highly leveraged data-centre developers and companies whose growth depends on uninterrupted project expansion.

Meanwhile, established technology businesses with diversified revenue streams and strong cash generation may have more flexibility to manage regulatory uncertainty.

The next phase of the AI trade may not be determined by who can buy the most GPUs, but by who can actually secure the power, land and approvals to put them to work.

That is a risk worth watching before assuming every AI-related stock will benefit equally from the next wave of investment.

For discussion purposes only. Not financial advice or a recommendation to buy or sell any security.