Article by: Tide Research
The Democratic candidate unexpectedly won the Texas gubernatorial election, and the largest AI-powered electricity faucet in the U.S. has been put on hold.
Morgan Stanley analyst Stephen Byrd noted that authority to restrict data center expansion is almost entirely held by individual states. Newly elected governors have pledged to suspend new approvals, leading to comprehensive delays or even cancellations of 474 GW of grid connection applications in Texas.
This local election shattered the illusion of unlimited AI power supply. Compute projects without access to immediate power are facing shutdowns, while existing power plants that have already secured contracted capacity are experiencing unprecedented premiums.
Local administrative orders directly block the grid connection channel.
The White House and Congress have no authority over local transformers.
The report notes that the real levers controlling the approval of data center deployments are not in Washington, but rather in state utility commissions, legislatures, and county governments. Newly elected Texas Governor Gina Hinojosa campaigned on a clear platform of imposing a moratorium on new data center approvals.
After taking office, the governor can unilaterally issue an executive order requiring state agencies to suspend the issuance of unapproved permits, without needing approval from the Republican-controlled legislature.
This has directly halted the large-scale grid interconnection process of the Electric Reliability Council of Texas (ERCOT). Previously, Texas had suspended certain connection approvals to clear the grid backlog, at which time the queued applications totaled as much as 474 GW—more than five times Texas’s historical peak electricity demand—with data centers accounting for 90% of the new electricity demand.
Following the executive order, the ongoing Batch Zero transmission planning review may be completely halted. The time to obtain grid interconnection approval for projects that have not yet started construction will be indefinitely extended from the previously expected several months.
The hashpower landscape is splitting into two camps.
Policy risks are dividing the entire United States into two distinct regions: states welcoming computing power and states driving it away.
In Ohio, the election of Democratic candidate Amy Acton as governor has similarly stalled progress. The state’s most prominent blocked project is a 10-gigawatt (GW) mega-computing cluster planned by NVIDIA in partnership with a leading U.S. AI laboratory. Amazon’s 1.5GW project under construction in Fayette County is also facing setbacks due to tightened tax incentive policies.
However, policy resistance in Pennsylvania and Louisiana remains relatively manageable. Pennsylvania Governor Shapiro has implemented a certification process based on grid affordability and environmental standards, without directly halting project approvals.
This sharp divergence in state policies is fundamentally reshaping the logic behind site selection for AI infrastructure development. Developers, who previously prioritized Texas for its low electricity prices and relaxed regulations, now find the uncertainty surrounding approval timelines outweighing cost advantages alone. While the overall national spending on AI capital may not shrink, its geographic distribution is being forcibly restructured.
Existing assets are on average 30% more expensive than the stock price.
With new projects unable to be approved, the intrinsic value of independent power producers (IPPs) holding confirmed, grid-connected assets has surged dramatically.
Morgan Stanley has revalued its core power generation assets. This valuation considers only the cash flows from existing assets, signed contracts, and forward power price curves, and excludes any potential premium from future data center contracts.
The calculation shows that the intrinsic value of the current assets is significantly higher than the closing price on November 3:
The intrinsic value of Vistra (VST) shares is approximately $180 per share, which is 28.57% higher than the $140 closing price.
The intrinsic value of NRG Energy (NRG) shares is $129 per share, which is 34.38% higher than the $96 closing price.
The intrinsic value of Talen Energy (TLN)’s existing assets is $430 per share, which is 20.45% higher than the closing price of $357.
The current asset value of Constellation Energy (CEG) is $249, slightly below its closing price of $263; however, this valuation entirely excludes the potential for direct nuclear power supply contracts in the Pennsylvania PJM market. Factoring in expected future nuclear power contracts, the firm maintains its $378 price target.
The market is currently extremely pessimistic about independent power producers, offering no premium valuation for future power supply contracts for computing capacity, and even applying a discount to the baseline cash flows of existing power plants. Once the pricing power of existing units is realized, these assets themselves possess solid fundamental value support.
The differentiation in the mining infrastructure chain is accelerating.
Assets also benefiting from the AI power narrative are affected by policy changes to vastly different degrees.
Data center service providers (PSPs) that rely solely on the Texas grid’s queue for expansion are hit hardest. Galaxy Digital’s (GLXY) planned Helios II project (830 MW), which originally had a 95% probability of on-time commissioning, now faces reassessment. The likelihood of securing leases for new sites such as Cipher Mining’s (CIFR) Colchis must also be significantly reduced, with a bear-case valuation model for CIFR—assuming no new projects—pricing the stock at just $5 per share.
In contrast, the behind-the-meter (BTM) power supply model, which is not constrained by the Texas grid, highlights its advantages.
WMB leverages its nationwide natural gas pipeline network to provide gas turbine captive power solutions for hyperscale cloud providers. By pre-booking gas turbines, WMB can deliver electricity directly within 18 to 24 months after contract signing, completely bypassing the multi-year utility grid interconnection queue.
Bloom Energy's (BE) solid oxide fuel cells also feature harmless emissions, zero water consumption, and low noise. In states with strict environmental regulations led by Democrats, fuel cells are becoming a direct replacement for large gas turbines.
TeraWulf's (WULF) primary development projects are located in Kentucky. Having previously successfully navigated construction moratoriums in New York, the management team’s experience with cross-regional regulatory approvals has insulated it from the impact of Texas policies.
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Trend Analysis
The most vulnerable assumption in this report is equating the Texas governor’s proposal to restrict construction with an actual, permanent halt in approvals. Texas’s Republican-led state legislature is deeply aligned with powerful oil, gas, and business interests; completely blocking cryptocurrency mining investments would severely damage the state’s finances and employment.
If the new governor fails to pass legislation establishing detailed construction limits within 12 to 24 months, the large backlog of projects will resume after the administrative freeze ends, proceeding under guaranteed electricity rate provisions. Readers no longer need to monitor national AI computing sentiment; instead, focus on the appointment of new members to the Texas Public Utility Commission (PUCT) in 2027 and the final approved list of ERCOT’s first batch of high-load transmission plans (Batch Zero) following audit.
Disclaimer
This article is a compilation and interpretation of third-party brokerage research reports. The ratings, price targets, earnings forecasts, and related judgments cited herein reflect the views of the brokerage's analysts and represent the positions of their respective institutions, not those of Chaoxiang Research, nor do they constitute any investment advice.
The market carries risks; make decisions independently. This article should not be used as a basis for buying or selling any securities.