Texas Data Center Pause Raises Different Risks for Vertiv and Vistra

By James Calloway

Texas accounts for approximately 25% of planned U.S. data center capacity, according to Reuters, so a prolonged approval freeze could delay billions of dollars in proposed artificial intelligence (AI) infrastructure investment.

24/7 Wall St. said rankings vary with project count, but Texas ranks among the largest development markets. Virginia leads operating data centers; Texas leads planned projects, aided by land, energy resources, and a historically favorable business environment.

Takeaway: The size of Texas's pipeline turns a local permitting dispute into a national AI investment risk.

What could a Texas freeze change?

After the November 3 midterm elections, 24/7 Wall St. reported that Texas governor-elect Gina Hinojosa defeated incumbent Greg Abbott. She proposed maintaining data center approval restrictions until the legislature protects electricity consumers, water resources, and surrounding communities.

Abbott had already directed state agencies to pause some environmental permits and grid connections while officials investigated electricity and water use. Hinojosa wants the moratorium to continue until lawmakers adopt protections, potentially extending uncertainty into 2027.

Takeaway: A short administrative review and a legislative moratorium carry different construction and investment timelines.

How do Vertiv and Vistra differ?

Vertiv manufactures the physical systems inside data centers: uninterruptible power supply (UPS) systems, electrical power distribution equipment, liquid cooling systems, chillers, and thermal management equipment. These products keep servers powered and cooled, but Vertiv does not generate their electricity.

Vistra produces and sells power through natural gas, nuclear, coal, and solar plants, plus retail businesses. Its AI opportunity comes from serving heavy consumption in its operating markets, not selling inside facilities.

Vertiv can sell across states and borders. Vistra benefits only when new demand appears in a market where it can supply power or capture the load.

Takeaway: Vertiv can follow capacity across borders; Vistra needs the load to remain in its markets.

Does Vertiv's order book show durable demand?

Vertiv's October 28 earnings report showed Q3 revenue of $4.31 billion, up 61% year over year, including 55% organic growth. Organic orders rose more than 100% year over year, and adjusted operating margin reached 25.2%. Organic measures exclude acquisition effects.

Revenue rose 75% in the Americas, 50% in Asia Pacific, and 23% in Europe, the Middle East, and Africa. 24/7 Wall St. said this spread could preserve equipment orders if developers leave Texas.

24/7 Wall St. noted that relocation carries costs: developers may redesign power systems, modify cooling, secure utility links, and renegotiate construction. Such changes can delay orders and revenue, while uneconomic projects may cancel.

Management raised full-year 2026 revenue guidance to a $14.65 billion midpoint and expects adjusted earnings per share (EPS) of about $7.15. It projects adjusted free cash flow, a company-reported measure after operating and investment spending, of $2.6 billion-$2.8 billion.

The caveat is conversion. Orders can outrun revenue, and relocation delays can interrupt deliveries; unusually high growth has also left Vertiv vulnerable to a valuation correction.

Takeaway: Vertiv has strong current evidence, but only delivered revenue can validate its valuation.

Why is Vistra falling despite earnings growth?

Vistra faces concentrated Texas exposure. In Q3 2026, its Texas segment produced $1.23 billion in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), up from $784 million a year earlier. Texas supplied about 52% of $2.38 billion in ongoing-operations adjusted EBITDA.

November 6 results showed $2.38 billion in ongoing-operations adjusted EBITDA, up 50.4% from $1.58 billion in 2025. Management raised 2026 guidance to $7.1 billion-$7.5 billion and set 2027 guidance at $7.7 billion-$8.5 billion.

The 2027 midpoint implies about 11% growth over 2026. Higher realized electricity and capacity prices helped earnings, while existing plants served customers without waiting for new data center approvals.

In October, Vistra completed the acquisition of about 5,500 megawatts of natural gas capacity from Cogentrix Energy. It also authorized an additional $1.5 billion in buybacks and gave 2027 adjusted free cash flow before growth guidance of $4.3 billion-$5.1 billion.

Those results temper the bear case but do not erase concentration risk. A delay slows new load rather than removing existing-customer revenue, though it could weaken longer-term power-price and growth expectations.

Takeaway: Vistra's earnings are strong today, while its 2027 case depends on new power demand.

Has demand already moved out of Texas?

At its November 6 investor discussion, Vistra management said it "had not observed a shift in large-customer electricity demand from Texas to the PJM electricity market following the election." PJM is a regional U.S. power market. Talks continued with customers in both markets about existing and new projects.

24/7 Wall St. treated that as evidence against an established relocation wave: uncertainty exists, but its financial effects have not appeared. The figures show current strength, not assurance for 2027.

Takeaway: Management reported no post-election customer migration, but that snapshot cannot show where future projects will go.

What does the share-price split show?

The stock-price divergence is sharp: in the November 7 YCharts comparison, Vertiv lost 0.09% over one year and Vistra fell 32.40%. That gave Vertiv a 32.31-percentage-point advantage. Over three years, Vertiv gained 360.0% and Vistra gained 253.2%, a 106.