U.S. Data Center Construction Reaccelerates, Led by Texas as New Projects Spread to Emerging States

Overview

Using construction spending, project starts, announced project pipelines, hyperscaler capital expenditure, and projected capacity additions, the report concludes that the U.S. data center construction cycle remains in a strong expansion phase. It further analyzes project distribution by state and maps regional trends to FIX, LGN, and EME, arguing that future competitiveness will increasingly depend on geographic breadth, the ability to enter new markets, labor mobility, and prefabrication capacity.

Core views

Data center construction spending is reaccelerating. Spending increased 46% year over year in June 2026, above 32% in May and 33% in June 2025, reaching a US$68 billion annualized rate; cumulative growth over the latest three months was approximately 18%, equivalent to an annualized growth rate of roughly 90%. Combined with signs of improving returns on artificial intelligence investment in second-quarter results and continuously rising hyperscaler capital expenditure forecasts, Goldman Sachs raises its average 2026 and 2027 data center construction spending forecasts by 10% to US$67 billion and US$87 billion, respectively, corresponding to growth of 35% and 30%. Multiple leading indicators collectively point to spending remaining significantly above current levels over the next two years, although the report emphasizes that the main uncertainty concerns project timing rather than the direction of demand. As of July 2026, monthly data center construction starts increased 528% year over year, while the trailing 12-month total rose 189% year over year, above 118% in June and 62% in July 2025. Construction starts are useful for assessing multiyear demand and direction, but because project schedules vary considerably, they do not align precisely with the pace of spending over the next 6–12 months. Project announcements provide a second set of forward-looking evidence. Aterio tracks project progress using satellite imagery, permits, and filings; announced projects not yet under construction currently number approximately 4.5 times the projects under construction and have increased 60% year over year, compared with year-over-year growth of 145% in August 2025. Because not all announced projects will proceed, the report also assesses execution probability: as of August 2026, high-probability projects not yet under construction increased 32% year over year, below 89% in August 2025; high- and medium-probability projects combined increased 66% year over year. This indicates that the pipeline remains substantial, but total announcements must be distinguished from executable projects. Hyperscaler capital expenditure and projected capacity additions provide further support for a multiyear construction cycle. Capital expenditure is typically first allocated to GPUs, land, and other preliminary infrastructure and therefore leads actual construction; forecasts cited in the report indicate that hyperscaler capital expenditure will increase approximately 92% year over year in 2026 to nearly US$800 billion, with another 32% increase expected in 2027. Based on project tracking by 451 Research, Goldman Sachs’ global technology team expects 18,842 MW of new U.S. data center capacity in 2027, representing 38% growth in capacity additions; because new capacity has historically been closely linked to construction activity, this forecast supports continued significant growth in construction spending in 2027. National totals obscure clear regional divergence. More than 875 data centers are currently under construction in the United States, with aggregate capacity of approximately 75 GW; the five states with the greatest capacity under construction account for nearly 60% of the national total, led in order by Virginia, Texas, Ohio, Georgia, and Arizona. However, the ranking by announced projects has already changed: Texas leads by a wide margin, followed by Virginia and Georgia, while Pennsylvania and Utah have entered the top five by number of announced projects and Ohio and Arizona have dropped out. The fastest-growing regions do not overlap with the largest current markets. Announced projects in Missouri, Oklahoma, Florida, Michigan, and Kansas have each increased severalfold from the prior year, but the five states together account for only approximately 215 projects, or roughly 6% of all announced U.S. projects, far fewer than the more than 860 projects in Texas alone. Among established markets, Texas increased 107% year over year, Ohio 116%, Georgia 54%, and Arizona 33%, while Virginia, the largest market by capacity under construction, grew only 9%. Thus, new activity is spreading beyond traditional hubs, although absolute scale remains highly concentrated. Power availability, permitting, labor supply, and local opposition determine when projects proceed and also create regional differences. Texas has suspended approvals of new data center grid-connection applications; on August 18, 2026, the governor of Pennsylvania signed Executive Order 2026-05, requiring developers to make legally binding commitments to GRID responsible infrastructure development requirements. Goldman Sachs’ utilities team expects limited practical impact on high-quality large projects, with timing representing the primary risk and pressure falling more heavily on speculative, undercapitalized projects; approved projects and projects planning on-site self-generation are unaffected by the relevant measures, providing some protection to the covered companies’ existing backlogs. At the company level, EME has the broadest trade-labor coverage among the three companies, with operations in Northern Virginia, Texas, Georgia, Ohio, Pennsylvania, Arizona, Indiana/Chicago, and the Carolinas through organic expansion and acquisitions. Northern Virginia is its largest backlog contributor, followed by Texas and Georgia; even before Schmidt’s contribution, Texas generated approximately US$1 billion in non-oil and gas revenue, while mechanical and electrical acquisitions have strengthened coverage of urban and rural markets. Its broad local labor base makes EME best positioned to cover the major established markets, while its existing oil and gas operations may also support projects in remote areas. FIX has the most direct leverage to Texas and emerging markets. Texas contributes approximately 42% of its year-to-date organic growth, while Indiana and North Carolina together contribute more than 25%; announced projects in Indiana increased more than 50%, while North Carolina was roughly flat over the past year. Prefabrication revenue has increased from approximately 10% of revenue in 2022 to roughly 17%, with current prefabrication space exceeding 3.5 million square feet and expected to surpass 4 million square feet by year-end and reach 5 million square feet by the end of summer 2027. Following the 2022 acquisition of Kodiak Labor Solutions, approximately 20% of the workforce can be deployed beyond the previous operating radius of 100–150 miles from local offices, enabling FIX to enter labor-constrained markets or markets where it lacks a permanent presence. LGN’s installation workforce is concentrated primarily in California, Phoenix, and the DMV region, with the DMV representing its largest data center market; announced project growth in these markets is approximately 38% in California, 33% in Arizona, and 9% in Virginia. The company is entering Texas through adjacent operations in New Mexico and using its prefabrication platform to serve markets such as Georgia, Charlotte, Iowa, and Ohio, where it lacks permanent installation teams. In the second quarter, LGN added approximately 200,000 square feet of prefabrication capacity, bringing total capacity to approximately 1.5 million square feet, and plans to add another 100,000 square feet in the near term. Its exposure to emerging regions therefore comes more from its prefabrication platform than from local installation labor. On valuation, FIX is rated Buy with a 12-month target price of US$2,159, based on 22 times Q5–Q8 EV/EBITDA; key downside risks include slower hyperscaler capital expenditure, project execution risk, and a high earnings delivery threshold. LGN is rated Buy with a US$95 target price, based on 15.5 times Q5–Q8 EV/EBITDA; risks include slower data center capital expenditure, margin volatility resulting from changes in business mix, above-average net leverage, and competitive pricing. EME is rated Neutral with a US$885 target price, based on 14.5 times Q5–Q8 EV/EBITDA; accretive acquisitions, better-than-expected margin improvement, or market-share gains represent upside risks, while slower data center capital expenditure, margin deterioration or volatility, and a further slowdown in private nonresidential construction represent downside risks.

Analysis framework

The report first uses monthly construction spending to confirm current business momentum, then cross-validates it using project starts, announced project pipelines and their execution probabilities, hyperscaler capital expenditure, and 2027 capacity additions, while distinguishing the direction of long-term demand from construction timing over the next 6–12 months. It then compares capacity under construction, announced project counts, and year-over-year growth by state and matches these regional data with the labor forces, prefabrication facilities, acquired assets, and principal market footprints disclosed by EME, FIX, and LGN. Finally, it derives 12-month target prices for each company using Q5–Q8 EV/EBITDA multiples and presents company-specific risks.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Cross-validation of data center construction demand and capacity additions

  The report places current construction spending, the project pipeline, cloud service provider capital expenditure, and future capacity additions within a single supply-demand framework to assess the scale and durability of construction demand and the direction of future spending.

• Cycle and Business Momentum FrameworkBusiness Cycle Inflection Analysis

  Tracking the construction cycle through multiple leading indicators

  The report uses construction starts, announced projects, execution probabilities, and capital expenditure to determine whether construction spending is reaccelerating, while explicitly noting that construction-start indicators are useful for assessing the multiyear direction but cannot precisely forecast the pace of revenue over the next 6–12 months.

• Industry/Sector Analysis Framework

  Mapping state-level project data to companies’ regional exposure

  The report compares capacity under construction, announced projects, and growth rates across states, then matches them with companies’ local labor forces, mobile construction capabilities, and prefabrication facilities to assess each company’s ability to participate in growth across established and emerging markets.

• Competition and Strategy FrameworkMoat / competitive advantage

  Geographic breadth, labor mobility, and prefabrication capabilities

  As construction activity spreads beyond traditional hubs, the report views broad geographic coverage, the ability to deploy labor across regions, and the capacity to supply prefabricated products independently of local installation teams as competitive differentiators among contractors.

• Valuation MethodEV/EBITDA valuation

  Q5–Q8 EV/EBITDA target-price valuation

  The report assigns Q5–Q8 EV/EBITDA multiples of 22 times, 15.5 times, and 14.5 times to FIX, LGN, and EME, respectively, and derives 12-month target prices accordingly.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Comfort Systems USA (FIX)

  Texas is its largest data center market, while its prefabrication platform and mobile workforce enable the company to enter emerging and labor-constrained markets; the report assigns a Buy rating and a US$2,159 target price.

  Strengths

  Texas contributes approximately 42% of year-to-date organic growth; the prefabrication business represents approximately 17% of revenue and has more than 3.5 million square feet of capacity; approximately 20% of the workforce can be deployed across traditional regional boundaries.

  Weaknesses

  Growth in North Carolina project announcements has been roughly flat over the past year, and entry into some markets still depends on prefabrication and deployed labor rather than permanent local teams.

  Comparison

  Compared with EME, FIX has narrower local-market coverage but more direct leverage to Texas, emerging markets, and cross-regional execution.

  Risks

  Slower hyperscaler capital expenditure, project execution risk, and a high earnings delivery threshold.

• Legence (LGN)

  Its installation workforce is concentrated in California, Phoenix, and the DMV region, but its prefabrication platform significantly expands its addressable markets; the report assigns a Buy rating and a US$95 target price.

  Strengths

  Prefabrication capacity is approximately 1.5 million square feet and continues to expand, enabling it to serve markets such as Georgia, Charlotte, Iowa, and Ohio, where it lacks permanent installation teams.

  Weaknesses

  Its installation workforce is concentrated primarily in three core regions, and participation in high-growth areas depends more heavily on the prefabrication business.

  Comparison

  Compared with EME and FIX, LGN’s local trade-labor coverage is more concentrated, but its prefabrication platform gives it a larger effective service territory than its local installation footprint.

  Risks

  Slower data center capital expenditure, margin volatility caused by changes in business mix, above-average net leverage, and competitive pricing.

• EMCOR Group Inc. (EME)

  It has the broadest trade-labor coverage among the three companies in major data center markets; the report assigns a Neutral rating and a US$885 target price.

  Strengths

  Covers Northern Virginia, Texas, Georgia, and several other major markets; even before Schmidt’s contribution, Texas generated approximately US$1 billion in non-oil and gas revenue, while acquisitions continue to strengthen its mechanical and electrical footprint.

  Weaknesses

  Growth in announced projects in Northern Virginia, its largest backlog market, has slowed to 9%.

  Comparison

  EME has the broadest geographic coverage across established markets, FIX has greater leverage to Texas and mobile construction in emerging markets, while LGN relies more heavily on its prefabrication platform to expand geographically.

  Risks

  Slower data center capital expenditure, margin volatility or deterioration, and a further slowdown in private nonresidential construction spending.

Key data

• 2026 data center construction spending forecastUS$67 billionFollowing an average 10% forecast increase, implying 35% year-over-year growth
• 2027 data center construction spending forecastUS$87 billionFollowing an average 10% forecast increase, implying 30% year-over-year growth
• June 2026 construction spendingUS$68 billion annualized rate, +46% year over yearYear-over-year growth was 32% in May and 33% in June 2025
• Change in construction spending over the latest three monthsApproximately +18%Equivalent to an annualized growth rate of approximately 90%
• July 2026 data center construction starts+528% year over yearUp 189% year over year on a trailing 12-month basis
• Ratio of announced projects not yet under construction to projects under constructionApproximately 4.5 timesAnnounced projects increased 60% year over year
• High-probability projects not yet under construction+32% year over yearAs of August 2026; high- and medium-probability projects combined increased 66%
• Hyperscaler capital expenditureApproximately +92% in 2026, +32% in 2027The 2026 total is expected to approach US$800 billion
• New U.S. data center capacity in 202718,842 MWCapacity additions increased 38% year over year
• U.S. data centers under constructionMore than 875, approximately 75 GWThe five states with the greatest capacity under construction account for nearly 60% of the national total
• Announced projects in TexasMore than 860, +107% year over yearRanks first in the United States by number of announced projects
• Five fastest-growing emerging statesApproximately 215 projects, roughly 6% of the national totalIncludes Missouri, Oklahoma, Florida, Michigan, and Kansas
• Texas contribution to FIX growthApproximately 42%Share of FIX’s year-to-date organic growth
• FIX prefabrication businessApproximately 17% of revenueApproximately 10% in 2022; capacity is expected to increase from more than 3.5 million square feet to 5 million square feet by the end of summer 2027
• FIX workforce deployable across regionsApproximately 20%Can operate beyond the previous radius of 100–150 miles from local offices
• LGN prefabrication capacityApproximately 1.5 million square feetAdded approximately 200,000 square feet in the second quarter and plans to add another 100,000 square feet in the near term

Impact & implications

The report argues that the durability of U.S. data center construction demand is more important than short-term construction timing, with leading indicators supporting spending remaining elevated over the next two years. At the same time, new projects are spreading beyond traditional hubs, and contractors that rely solely on a small number of local markets may struggle to participate fully in the growth; EME, with its broad coverage, FIX, with its mobile workforce and large prefabrication platform, and LGN, which is expanding its service radius through prefabrication, each gain exposure to regional expansion in different ways.

Risks

• Permitting delays, inadequate power supply, local opposition, and labor constraints may postpone project starts and backlog conversion.
• The suspension of grid-connection approvals in Texas and new regulations in Pennsylvania may create project timing risks, with speculative, undercapitalized projects facing greater impact.
• FIX faces risks from slower hyperscaler capital expenditure, project execution, and a high earnings delivery threshold.
• LGN faces risks from slower data center capital expenditure, margin volatility caused by changes in business mix, above-average net leverage, and competitive pricing.
• EME faces risks from slower data center capital expenditure, margin volatility or deterioration, and a further slowdown in private nonresidential construction.
• Not all announced projects will enter the construction phase, so total announcements may overstate ultimately executable demand.

What to watch

• Monitor whether monthly data center construction spending can sustain the 46% year-over-year growth recorded in June 2026.
• Track changes in project starts, announced projects, and high-probability projects, as well as the timing of their conversion into actual construction and revenue.
• Monitor whether 2026–2027 hyperscaler capital expenditure forecasts and projected 2027 capacity additions continue to be revised upward.
• Observe differences in growth rates between large markets such as Texas, Virginia, and Georgia and emerging markets such as Missouri, Oklahoma, Florida, Michigan, and Kansas.
• Assess the actual impact of regulatory measures in Texas and Pennsylvania on large approved projects, grid-connection timing, and speculative projects.
• Track FIX’s expansion of prefabrication capacity and cross-regional labor, LGN’s additional prefabrication capacity, and the integration and order contribution of EME’s acquired assets in new markets.