Austin’s tech industry has long been a driving force behind its booming economy, and now, large data centers are rapidly emerging as significant players. This expansion is driven by increasing demand for AI and high-performance computing, which require massive investments and raise concerns about energy consumption and infrastructure strain.
Strategic location, local incentives, and massive AI investments have all been the reasons for the spike in data center construction in the Austin area. Several new projects have been recently approved or are under development. Colovore received a permit for a $500 million data center in Hutto, specializing in liquid-cooled, high-density colocation for AI and high-performance computing, with plans for a 180,000 square-foot facility and 13,000 square-foot office space. Blueprint Projects secured incentives for a $160 million data center in Georgetown, with a potential second phase, and is also planning a $1 billion data center development in Taylor. EdgeConneX approved a $1.4 billion, 2.8 million-square-foot data center campus in Bastrop County with four buildings. Skybox Datacenters is also working on projects in both Hutto and Pflugerville. Prime Data Centers is planning a $1.3 billion data center on 206 acres near San Marcos.
Construction for data centers has more than quadrupled year-over-year in the Austin-San Antonio market. However, this rapid development poses challenges, such as increased demand on the power grid and the need for sustainable practices. The increasing use of AI is driving up energy consumption in data centers. AI-driven demand is projected to increase data power usage by 160% by 2030. Goldman Sachs estimates that AI alone will be responsible for an increase of 200 terawatt-hours per year in data center power consumption between 2023 and 2030.
However, some potential solutions could help mitigate the impact of AI on energy consumption. Innovation in liquid cooling technologies could significantly reduce energy usage. For instance, researchers at UT Austin have developed a new thermal interface material using liquid metal and aluminum nitride that could reduce data center cooling requirements by 13%, leading to a 5% reduction in overall energy use. Next-generation AI hardware requires higher rack density and advanced cooling technology, which demand more power. Though still in early development, small modular reactors (SMRs) could provide a more sustainable source of energy for data centers down the road.
As the wave of AI announcements continues to grow, a handful of notable recent investments are expected to accelerate the development of data centers. The Stargate Project, a joint venture involving OpenAI, SoftBank, Oracle, and MGX, has announced a massive $500 billion investment in AI infrastructure across the U.S., with 10 data centers already under construction in Texas. This project is intended to support the re-industrialization of the United States and to keep America ahead in AI development. Microsoft announced plans to invest $80 billion in AI data centers this year. Additionally, a fund launched by BlackRock and Microsoft could allocate up to $100 billion toward new data centers and AI infrastructure. Following President Trump’s election, Hussain Sajwani, an Emirati billionaire, committed $20 billion to construct data centers in the U.S., with the first phase of projects to occur in Texas, among seven other states. Meta plans to invest over $60 billion in capital expenditures, primarily on data centers and servers, to bring approximately 1GW of computing power online this year. The announcements seem to keep coming as the momentum for AI grows worldwide.
This magnitude of projects does not come without its implications on the surrounding real estate. Data centers will drive immediate demand for large suburban tracts with strong power infrastructure, raising land costs and impacting competing industries. This may reshape development plans, displacing less capitalized projects, as seen with Tract’s planned 2,000-acre data center park near Austin. Furthermore, the unique requirements of data centers will create opportunities for businesses providing specialized services, such as construction, engineering, power, connectivity, security, and maintenance, all of which will see increased demand to support these complex projects.
The surge in data center development will solidify Austin’s position as a hub for high-tech innovation, attracting billions in investments and creating opportunities across various industries. This growth will drive job creation, boost the local economy, and enhance the city’s role in supporting the global AI and cloud-computing sectors, positioning Austin as a leader in the next wave of technological advancement.