New regulations issued this week in two of the most consequential data center markets add to a growing wave of states enacting hurdles for the industry as public sentiment toward the artificial intelligence boom sours.

The new data center regulations enacted by Democratic California Gov. Gavin Newsom and Republican Texas Gov. Greg Abbott come from politicians at opposite ends of the political spectrum leading states heading in opposite directions relative to the AI data center boom. Texas has become the world’s fastest-growing data center market, while California’s data center growth has largely stagnated despite its status as the center of the technology industry.

Both Newsom and Abbott had previously looked to grow the data center sector in their respective states. Their shifting positions regarding data center development reflect a national trend, as elected officials nationwide — regardless of their past positions — signal their willingness to restrict a sector that is increasingly unpopular with voters.

In California, Newsom this week signed a package of seven bills imposing new requirements on data center operators and developers and expanding state oversight of their electricity use and water consumption. The legislation requires data centers to pay for the grid upgrades needed to provide them with power and to shoulder a greater share of wildfire mitigation and liability costs.

The package also requires developers to disclose information on power and water demand and workforce needs, and it mandates providing nearby communities with additional information to evaluate projects during the approval process. The measures also require new data centers to incorporate on-site clean energy resources.

"With these laws, ​we are ensuring that Californians remain in the driver’s seat — and that those ​profiting from data centers aren’t doing so at our expense," Newsom said in a statement.

The decision to sign all seven bills into law marks a shift in Newsom’s approach to the data center sector. As recently as last fall, he had aimed to balance consumer protections with efforts to encourage data center development, signing a bill directing regulators to study data centers’ impact on power prices but vetoing legislation — similar to a bill he just signed — that would have required operators to disclose their water consumption.

At the time, Newsom made clear in a statement that he did not want reporting requirements to impede the industry’s growth in the state.

“California is well positioned to support the development of this critically important digital infrastructure in the state,” Newsom wrote in a statement last October. “I am reluctant to impose rigid reporting requirements about operational details on this sector without understanding the full impact on businesses and the consumers of their technology.”

While demand for data center capacity in California remains high, the state’s acute power shortages, along with power and development costs and regulatory hurdles that are among the highest in the nation, have pushed new construction elsewhere. Silicon Valley and Southern California — once considered global data center hubs — have become peripheral “edge” markets.

In recent months, there have been signs of a potential turnaround, with industry insiders suggesting that new restrictions elsewhere in the U.S. could make developers give California a fresh look. Now, industry trade group Data Center Coalition says these new measures could accelerate California’s downward trajectory as a data center market.

"These ​are likely to further limit data center ​development in California — an already declining market — which pushes job creation, clean energy deployment, and tax revenue ​to neighboring states," Khara Boender, a director of government affairs for the group, said in ⁠a statement to Reuters.

Meanwhile in Texas, Abbott issued a directive Monday barring the state’s environmental agency from issuing new permits for data center projects until regulators complete a comprehensive audit of data center projects trying to connect to the state’s power grid, managed by the Electric Reliability Council of Texas. The directive effectively freezes state permitting in the nation’s fastest-growing data center hotbed.

The permitting pause expands Abbott’s August order requiring state agencies to conduct audits of all proposed data center projects to determine their planned power and water consumption, ownership and other information before allowing them to move forward.

As with Newsom in California, the new measures meant to restrict data center growth mark a significant pivot for Abbott. Under his leadership, Texas began the year on track to surpass Virginia as the industry’s largest market by 2030. This growth surge has been driven by the state’s reputation for easier pathways to power and a business-friendly political environment.

For developers with projects in Texas, Abbott’s recent decrees have put timelines in limbo, creating significant uncertainty as to whether they will secure the permits and grid connections needed to move forward.

“It's going to cost a lot of projects their opportunity to succeed, which is going to stink for lots of people,” said Skybox Datacenters Chief Development Officer Haynes Strader, speaking at Bisnow’s DICE: South last month following Abbott’s August order.

Abbott and Newsom are far from the only elected officials changing their tune when it comes to data centers. States across the country — both data center hotbeds and regions with little large-scale development — are adopting new restrictions on the industry, with a number of governors reversing positions after previously seeking data center investment.

The shift comes amid intensifying public concern over data centers’ electricity consumption, environmental consequences and impact on utility bills. With data centers poised to be a concern for voters ahead of November’s midterm elections, elected officials from both parties are embracing greater oversight of the sector.

Massachusetts Gov. Maura Healey, who had previously backed tax incentives to attract data centers, signed an executive order this month that puts up new hurdles for developers. The order requires developers to reach agreements with local communities before obtaining state permits and imposes new requirements intended to limit impacts on the electrical grid and environment.

In August, Pennsylvania Gov. Josh Shapiro, who threw his weight behind the booming data center sector last year, signed an executive order that will require any new data center projects to receive approval from local authorities to get the state government’s blessing. While it doesn’t amount to a moratorium, the measure could prevent many developments from advancing.

Last week, Virginia Gov. Abigail Spanberger signed an executive order establishing a statewide data center framework that included new limits on the use of on-site natural gas. Announcing the order, Spanberger said the measures mean that data centers “won’t have carte blanche to play by their own rules in Virginia.”

New York Gov. Kathy Hochul approved a statewide data center moratorium into law in July, while states like New Jersey, Oregon and Delaware have also enacted new restrictions on data centers in recent months.