Concerns about data center regulation in Texas in the United States are unsettling South Korean semiconductor stocks. After a Democratic candidate who pledged to suspend approvals for new data centers was elected governor of Texas, which accounts for 27% of the power capacity in planned US data center construction, Samsung Electronics and SK hynix shares were falling intraday in the 6% and 7% ranges, respectively.
Investor sentiment weakened on concerns that delays in AI data center construction could also affect demand for high-bandwidth memory (HBM) and server DRAM and NAND. However, suspending new approvals remains a campaign pledge, and existing data centers, construction projects and confirmed semiconductor orders have not been immediately canceled.
On the morning of November 5, Samsung Electronics traded at 203,750 won, down 6.54% from the previous trading day. SK hynix fell 8.95% to 1,271,000 won. Samsung Electronics preferred shares and SK Square also declined 5.77% and 9.01%, respectively, while Samsung Electro-Mechanics dropped 11.66%.
SK hynix, considered a direct beneficiary of AI data center investment and growing HBM demand, fell more sharply than Samsung Electronics. Selling appeared to spread to SK Square, which holds SK hynix as a major investment asset, and Samsung Electro-Mechanics, which supplies components for AI servers and semiconductors.
Texas accounts for 27% of power capacity in planned US data centers
According to foreign media reports on November 4, Democratic candidate Gina Hinojosa defeated Republican incumbent Governor Greg Abbott in the Texas gubernatorial election. It was the first time in 31 years that a Democrat had been elected governor of Texas.
During the campaign, Governor-elect Hinojosa pledged to temporarily suspend all approvals for new data centers until relevant legislation protecting Texas residents was in place. The intention is not to close data centers already operating, but to defer new approvals until arrangements addressing electricity and water use and resident protection are established.
According to Wells Fargo, Texas accounts for 27% of the total power capacity of data centers planned for construction in the United States. Texas has more than 250 data centers operating or planned, and investment raised for related projects since 2024 reportedly amounts to $100 billion.
The Abilene data center campus included in OpenAI and Oracle's “Stargate” project and Meta's El Paso data center are each being pursued at a scale of 1 GW. Google, Meta and other companies are also building data centers in Texas. This explains the market's sensitivity to policy changes in the state.
Data center regulatory risks had grown before the election
Moves to regulate data centers in Texas did not suddenly begin with this election. Before the election, Governor Abbott also ordered an audit of whether large data centers were suitable for grid connections as opposition from residents grew.
In July, Texas authorities required data center developers to pay a deposit of $50,000 per MW when applying for grid connections. The start of the audit also introduced uncertainty into the process of allocating capacity to developers requesting 75 MW or more.
Politicians were, in effect, responding to opposition over the burden that data centers' large electricity and water consumption places on residents' living costs, electricity bills and the environment. With the Republican administration, which had attracted AI data center investment through pro-business policies, also turning to regulation, uncertainty increased further following the election of a Democratic candidate who pledged a comprehensive suspension of new approvals.
Scott Ladner, chief investment officer at Horizon Investments, said: “There are real questions about where data centers will be built,” adding: “Texas, which had been favorable for data center construction, could become effectively unsuitable for it.”
Concern centers on investment delays rather than lower HBM demand
Even if Texas suspends new data center approvals, this would not immediately affect existing orders and earnings at South Korean semiconductor companies. It has not been determined whether projects already approved and under construction would be covered by the regulations. If developers move data centers from Texas to other regions, overall US demand for AI semiconductors could be maintained.
Nevertheless, semiconductor shares were hit hard because Samsung Electronics' and SK hynix's share prices strongly reflected expectations of expanding AI data center investment. The concern is that delays in starting construction and operations at new data centers could also postpone the introduction of GPUs, HBM and server memory.
Democrats also won gubernatorial elections in other major data center locations, including Georgia, Pennsylvania and Ohio. Concerns that data center construction regulations could spread to other regions would also have weighed on investor sentiment.
The current market reaction would reflect anticipation of policy uncertainty and possible investment delays rather than an actual decline in AI semiconductor demand.
Meanwhile, lawmakers elected in these midterm elections will begin their terms on January 3, 2027.
Original Korean article: lcnews.co.kr
English brief by Korea Wind Intelligence, koreawindintel.com
