Gabriel Collins, “Could the Permian Basin Become America’s Next AI Data Hub?” Rice University’s Baker Institute for Public Policy, August 15, 2025, https://doi.org/10.25613/CDF1-4006.
Winning the electricity race is critical to winning the global AI race. The United States’ present AI pre-eminence relies in part on a world-class tech and software ecosystem but equally, on a multi-gigawatt “digital industrial base” of massive data centers. Further rapid scaleup of this electricity-hungry physical system will determine whether the U.S. retains global AI leadership, and with it, global economic leadership — the most fundamental building block of comprehensive national power. The rapidly evolving AI competition between the U.S. and the People’s Republic of China is likely to have existential consequences and the U.S. urgently needs additional computing power to retain its edge.
If the U.S. can achieve an AI-driven productivity boom it will likely cement its role as the world’s largest and most technologically innovative economy. To continue leading the AI boom, the U.S. now faces an industrial and technological challenge on the scale of the Manhattan Project our forebears executed 80 years ago. This time, the investment is private but strategic facilitation will come from Washington and state capitals. U.S. government public statements thus far focus on building AI compute infrastructure in Pennsylvania and on certain federal lands, including the Idaho National Laboratory, Oak Ridge Reservation, Paducah Gaseous Diffusion Plant and the Savannah River Site.
The focus thus far omits a critical geography — the Permian Basin, which is one of the world’s premier energy production areas. To that point, Texas and New Mexico both have real opportunities to attract slices of capital spending from an AI-driven infrastructure investment boom larger than anything since the Shale Revolution. For perspective, Microsoft plans to spend $40 billion on AI-related data centers in the U.S. during Fiscal 2025. In contrast, Exxon, the largest U.S. oil producer, plans to spend a bit less than $30 billion on capital projects in North America during 2025.
Absent decisive action, progress risks being bottlenecked and strategic advantages lost. As computing power is deployed, its innovation and productivity effects tend to compound upon each other and are multiplicative (i.e., exponential) rather than additive (linear), as most other basic commodities such as oil, copper, corn, etc., tend to be. Former Google CEO and Chairman Eric Schmidt explains, “Faster airplanes did not help build faster airplanes, but faster computers will help build faster computers.” However, the corollary of generative progress is that when the system is starved of the crucial inputs driving the progress (ample, cheap computing power), direct and opportunity costs will also likely feed off each other and grow exponentially.
Our competitors are not standing still. Chief among them, the People’s Republic of China struggles at present to obtain enough compute capability but enjoys ample electricity courtesy of its underutilized coal power plant base and ability to rapidly build wind, solar, and nuclear power plants as well as long-distance power lines. Accordingly, if it continues to make technical progress in chip production, it will be positioned to scale computing power fast and to the detriment of American strategic position. The race is on and the U.S. has no time to waste.
The author thanks Joseph Webster of the Atlantic Council for his keen insights on the strategic context and framing of the evolving U.S.-China AI competition. He elaborates on many of these concepts in a recent analysis for War on the Rocks.
View the full paper (PDF) and dataset (accessible data tables).
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