As he campaigns across the Lone Star State, Republican Senate candidate Ken Paxton has seized upon Texans’ growing concern with artificial intelligence and adopted a hard-line stance, promising to crack down on rogue chatbots and rein in AI data centers’ tax breaks.
His new “Texas First” AI plan calls for consumer electricity price protections, among other measures. But it leaves out that, as a state lawmaker, he faced fraud charges for pushing massive data center tax breaks benefiting a tech firm that had “gifted” him 100,000 shares.
Also unmentioned: Paxton, now Texas Attorney General, holds up to $6.8 million worth of mutual funds invested in the data center or artificial intelligence boom — and his campaign has received at least $448,000 from other tech interests that stand to benefit from the AI build-out.
“Ken Paxton has taken nearly half a million dollars from data center companies — that’s why he’s saying, ‘If we don’t have data centers, we’re going to be in trouble,’” Texas Democratic Senate candidate state Rep. James Talarico said in a statement. “In the legislature, he awarded data centers billions of dollars in tax handouts. As Attorney General, he has ignored Texans asking him to help block data center development in their community and done nothing to hold data centers accountable.”
Last November, Paxton’s office filed an amicus brief in state court supporting the city of Sulphur Springs in its fight to build a massive data center. The city has teamed up with a developer to build one of the largest data centers in the country.
Additionally, commissioners in one Texas county have been waiting at least six months for Paxton’s legal opinion on whether they can temporarily halt data center development.
The Paxton campaign did not respond to a request for comment.
Texas has spent recent years working to lure tech companies to the state. In 2024, billionaire GOP-supporter Elon Musk moved his company SpaceX to Texas, just as the state rolled out a new court system for businesses. Tech software company Oracle, founded by Trump-supporter Larry Ellison, and numerous other firms have also moved to the state in recent years.
Now, Republican politicians in Texas are trying to shift their narrative in response to rising anti-tech sentiment among voters, said Rosario Lopez-Cadenas, a coordinator with environmental advocacy group Sunrise Movement Austin.
“[They’re] tapping into messaging that is very populist right now; they kind of want a piece of that pie,” she told The Lever.
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An Ice Cream Date Ends With A Generous Gift
Less than a year ago, Texas Gov. Greg Abbott (R) said the state is the “epicenter of AI development, where companies can pair innovation with expanding energy” while announcing a $40 billion Google investment in AI infrastructure in the state.
Since then, however, voters have soured on AI development, and politicians who once supported the AI boom are now backtracking.
Abbott, for example, announced on June 10 that he will be directing state electricity regulators to require data centers to pay for the electrical infrastructure needed to power them.
Likewise, last month, as part of his “Texas First Data Center Plan,” Paxton said he backed Abbott’s data center crackdown, including the plan to “repeal sales tax exemptions and other outdated incentives.”
But in 2013, Paxton, then a freshman state senator, voted for those tax exemptions, which provided tax breaks for Texas-based data centers. At the time, data centers were mostly dedicated to facilitating the internet and storing data for cloud computing. But the rise of artificial intelligence in recent years has caused the bill’s fiscal impact to explode. The 2013 tax breaks now are estimated to cost the state more than $3 billion in lost sales tax revenue over the next two years, the Texas Tribune reported.
One company that stood to indirectly benefit from the new tax breaks was Servergy, a Texas-based technology company that offered what it called a “revolutionary” new computer server. Servergy’s then CEO, William Mapp, claimed that its products “consumed up to 80 percent less power than other servers and that it was positioned to compete with servers from industry leaders like Hewlett-Packard, IBM, and Dell for use in large data centers.”
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At the time of his vote for the tax breaks, Paxton was heavily invested in Servergy’s success, having been issued 100,000 shares as compensation for recruiting investors to Servergy. That’s according to a 2016 Securities and Exchange Commission (SEC) lawsuit, which accused Paxton and Mapp of concealing the stock compensation from investors and allowing Paxton to operate as an unregistered broker for the company.
Financial disclosures filed by Paxton show that he held at least 10,000 shares of Servergy stock in 2012 and 2013 — and the 2012 disclosure was filed just weeks after the tax-exemption vote.
According to the SEC lawsuit, Paxton was offered a 10 percent commission on any investors he recruited for Servergy. Paxton told investigators that in 2011, he met Mapp at a Dairy Queen in McKinney, Texas, and tried to invest $100,000 of his own money in the company. Mapp refused the investment, Paxton said, and allegedly stated, “I can’t take your money. God doesn’t want me to take your money.”
Paxton then accepted 100,000 shares of the company from Mapp, telling investigators that the stock was a gift.
“The shares were not a gift but, instead, a sales commission paid to compensate Paxton for the investors he recruited,” argued the SEC’s lawsuit. “Paxton knowingly or recklessly failed to disclose the commission to investors despite an obligation to do so.”
By doing so, the lawsuit reads, Paxton, Mapp, and another Servergy employee engaged in an act “of business which operates or would operate as a fraud.”
In 2017, the lawsuit against Paxton was dismissed because a federal judge ruled that the SEC “failed to adequately allege Paxton had a duty to disclose his compensation to potential investors.”
But Mapp, the company’s CEO, was found liable for misleading investors in 2017 and was ordered to pay a $22,500 civil penalty.
Although the SEC lawsuit against Paxton was dismissed, a Harris County grand jury indicted Paxton on three felony counts for securities fraud for his role in the Servergy scandal. The charges were dropped in 2024 after Paxton agreed to complete 100 hours of community service and pay restitution to the alleged victims.
Additionally, Paxton faced an impeachment trial in 2023 stemming from whistleblower allegations that he used the Attorney General’s office to help a campaign donor under federal investigation. The Texas state Senate ultimately acquitted him.
None of these legal troubles apparently stopped Paxton from continuing to invest in data center interests.
“Sickening” Investments
Paxton’s most recent financial disclosure, filed on Aug. 13, shows that he has between $1,816,007 and $6,815,000 invested in eight mutual funds that own shares in data centers, AI companies, or companies that manufacture the chips and other hardware to power data centers and AI.
More specifically, Paxton owns between $1,000,001 and $5,000,000 worth of Vanguard Institutional Index Fund Institutional Plus Shares (stock ticker VIIIX). The fund has at least $120 billion invested in chipmakers Broadcom and Nvidia; tech companies Apple, Microsoft, Amazon, and Google; and social media company Meta Platforms.
He also owns between $250,001 and $500,000 worth of Vanguard Morningstar Total Stock Market Index Fund Admiral Shares (stock ticker VTSAX), a fund with similar tech and AI investments. Paxton’s other Vanguard mutual fund investments include between $100,001 and $250,000 in Vanguard PRIMECAP Fund Investor shares (stock ticker VPMCX), which is invested in Alphabet (Google’s parent company), Amazon, and chipmakers Micron Technology and Nvidia.
Additionally, Paxton owns between $250,001 and $500,000 worth of shares in DFA U.S. Large Company Portfolio (stock ticker DFUSX). Nearly a quarter of the fund consists of shares in Nvidia, Apple, Microsoft, and Amazon — all tech companies invested in AI.
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His other mutual fund investments include DFA Real Estate Securities Portfolio (stock ticker DFREX), which is invested in data center developers Prologis and Equinix; DFA Emerging Markets Portfolio I (stock ticker DFEMX), which is invested in chip manufacturers and tech companies; DFA U.S. Micro Cap Portfolio (stock ticker DFSCX), which has investments in firms manufacturing aspects of data center infrastructure; and DFA Emerging Markets Value Portfolio (stock ticker DFEVX), which is invested in companies profiting from AI.
These investments are “sickening” and “gross,” said Jamie Williams, a coalition coordinator with Sunrise Movement Austin and a national member of the group’s Black, Latinx, and Indigenous Caucus. “But it’s what I see with politicians all the time.”
Texas currently has more than 600 data center projects, whose massive water demands planners initially failed to account for in the state’s new five-year water usage plan. The Texas Water Development Board issued a revised plan in July that says it will enhance its water data collection efforts to improve projections of “digital infrastructure facility water demands for future state water planning cycles.”
Over three-quarters of Texas is currently in a drought, and the state “seriously underestimated what our water demand is going to look like,” Williams said. “[This] is going to be a huge problem because we already are seeing the Rio Grande Valley in the south is completely dry.”
