A looming Texas moratorium threatens billions in AI spending, yet one stock tied to it has sunk while its earnings soared. Which company is better positioned if data centers stall, relocate, or move overseas?
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- Texas has the nation’s largest data center development pipeline by some industry measures, accounting for approximately 25% of planned U.S. capacity. New restrictions could delay billions of dollars in AI investment.
- Vertiv manufactures the power and cooling equipment installed inside data centers, while Vistra generates and sells electricity. Their different businesses create very different exposure to Texas permitting restrictions.
- Vistra shares have fallen 32.4% over the past year despite third-quarter adjusted EBITDA growth exceeding 50%, raising questions about whether investors have already discounted much of the risk.
Texas Election Creates a New Risk for AI Infrastructure Investors
Texas has become the nation’s leading state for planned data center development, accounting for approximately 25% of proposed U.S. capacity according to Reuters. Although Virginia remains the largest market for operating data centers, Texas has attracted an enormous pipeline of proposed AI infrastructure projects, supported by available land, substantial energy resources, and a historically favorable business environment. Rankings vary depending on which proposed projects are counted, but Texas’s position as one of the nation’s largest development markets is beyond dispute.
That leadership now faces uncertainty following the November 3 midterm elections. Texas governor-elect Gina Hinojosa, who defeated incumbent Greg Abbott, has proposed maintaining restrictions on new data center approvals until additional protections are established for electricity consumers, water resources, and surrounding communities. The potential consequences extend beyond Texas because delays affecting such a large concentration of planned data center capacity could disrupt billions of dollars in AI infrastructure investment.
24/7 on YouTube 1:02Play: Vertiv (VRT) Ready To Skyrocket
Vertiv (VRT) Ready To Skyrocket
The restrictions did not begin with Hinojosa. Abbott had already directed state agencies to pause certain environmental permits and grid connections while officials investigated the industry’s electricity and water requirements. The difference is that Hinojosa wants to maintain the moratorium until the legislature adopts additional protections, potentially extending uncertainty into 2027. This creates an important distinction between a temporary administrative review and a more prolonged regulatory process that could affect construction schedules and investment decisions.
Two companies that illustrate the investment implications are Vertiv (VRT | VRT Price Prediction) and Vistra (VST). Although their names are similar and both benefit from AI infrastructure expansion, they sell fundamentally different products.
Vertiv manufactures the physical infrastructure inside data centers. Its products include uninterruptible power supply (UPS) systems, electrical power distribution equipment, liquid cooling systems, chillers, and thermal management equipment. These systems keep AI servers powered, cooled, and operating reliably. Vertiv does not generate the electricity consumed by those servers.
Vistra produces and sells electricity. It operates natural gas, nuclear, coal, and solar generating facilities, along with electricity retail businesses. Its opportunity from AI data centers comes from supplying the large amounts of electricity these facilities consume, rather than manufacturing equipment installed inside them.
This distinction is critical to understanding how the Texas controversy could affect their financial performance. Vertiv can potentially sell equipment to data centers constructed almost anywhere in the world, whereas Vistra benefits from additional electricity consumption in the U.S. markets where it operates. If projects are delayed or relocated, the consequences for the two companies could differ considerably.
Vertiv: Global AI Infrastructure Demand Remains Strong
Vertiv’s October 28 earnings report demonstrated that AI infrastructure investment continues to drive exceptional growth. Third-quarter revenue reached $4.31 billion, an increase of 61% from the previous year, including 55% organic growth. Organic orders increased more than 100% year over year, indicating that demand for its power and cooling systems continued to expand substantially faster than recognized revenue. Adjusted operating margin reached 25.2%, reflecting the company’s ability to translate higher sales volumes into improved profitability.
The geographic distribution of Vertiv’s growth is particularly important following the Texas election. Revenue increased 75% in the Americas, 50% in Asia Pacific, and 23% in Europe, the Middle East, and Africa. Although the Americas remain the company’s strongest growth region, these results demonstrate that demand for AI infrastructure equipment extends well beyond the United States. If developers relocate projects from Texas to other states or international markets, Vertiv could potentially retain a substantial portion of the equipment opportunity.
This geographic flexibility does not eliminate risk. Relocating a data center can require redesigning electrical infrastructure, modifying cooling systems, securing alternative utility connections, and negotiating new construction agreements. These changes can postpone equipment orders and revenue recognition even if the project eventually proceeds. Moreover, some planned facilities may be canceled rather than relocated, particularly if higher electricity or infrastructure costs undermine their economics.
Nevertheless, Vertiv’s financial outlook remains strong. Management raised its full-year 2026 revenue guidance to a midpoint of $14.65 billion, with adjusted earnings per share expected to reach approximately $7.15. The company also projected adjusted free cash flow between $2.6 billion and $2.8 billion for the year. These figures indicate that Vertiv’s growth is translating into substantial earnings and cash generation rather than depending exclusively on expectations of future AI investment.
The investment risk is therefore less about whether Texas will permanently eliminate demand for power and cooling equipment and more about whether construction delays could interrupt the company’s exceptionally strong growth trajectory. With organic orders more than doubling, investors have substantial evidence of current demand, but continued share price appreciation depends on Vertiv converting that demand into revenue and earnings at the pace the market expects.
Vistra: Earnings Growth Contradicts Its Falling Share Price
Vistra’s business model creates a different exposure to the Texas data center controversy. Rather than supplying equipment installed inside facilities, the company generates and sells electricity, making its future growth sensitive to the amount of power consumed by data centers and other customers in its operating markets.
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