By Harriet Torry

Texas notched another technology win this week when Apple said it is planning a new 250,000-square-foot factory in Houston to make servers for an artificial-intelligence system.

Tech investments are transforming the Texas economy, often via companies from California in search of lower taxes and fewer regulations on land use and labor.

Austin already has Apple's second-largest concentration of employees outside the company's Cupertino, Calif., headquarters. Samsung has a large and expanding semiconductor presence in the state. Earlier this year, Meta moved its trust and safety teams responsible for writing policy and reviewing content from California to Texas and other U.S. locations.

Others have moved their headquarters there, including Realtor.com, Tesla and Hewlett Packard. ( News Corp, owner of The Wall Street Journal, also operates Realtor.com.)

"In the end, it's all about the cost of doing business, and the cost of doing business is just lower in Texas," said John Diamond, an economist at Rice University in Houston.

Recently enacted reproductive policies in Texas, once slammed by business, haven't markedly dented the state's allure. Instead, the state is attracting the kind of tech-bro culture that has permeated the Trump administration, led by Elon Musk.

He is developing his own town for employees, Snailbrook, near Austin. Musk-led SpaceX has also bought up houses in the South Texas village of Boca Chica, near a base for the rocket and spacecraft maker, despite some resistance from locals.

Apple said the Houston facility -- which the company will develop with longtime business partner Foxconn -- will open in 2026. Apple didn't say how many people would be continuously employed there beyond saying it would create thousands of jobs. Asked for specifics, the company declined to elaborate.

In the decade running through early 2024, jobs in the Texas high-tech sector grew at an average annual rate of 4.7%, compared with overall job growth of 2.1%, according to the Federal Reserve Bank of Dallas.

Having dinner in downtown Austin "is like being in Silicon Valley circa 2005" because of the young and educated tech workers there, said Joseph Brusuelas, chief economist at consulting firm RSM, who lives in the state capital.

These jobs are also helping Texas diversify its economy, said Timothy Bray, director of the Institute for Urban Policy Research at the University of Texas at Dallas. "So it's not just oil and gas, it's not just real estate, it's not just manufacturing -- now we're talking about tapping a whole other vein of growth," he said.

Graze Robotics, a small startup that makes robotic landscaping equipment, moved its headquarters to Plano, Texas, from the Los Angeles area last year. The draw included incentives for relocating workers to Texas and building out its research-and-development center, rebates to offset sales tax, proximity to Fortune 500 companies, and lower costs for wages, Chief Executive Logan Fahey Franz said.

Another perk: the City of Plano's willingness to let Graze test products on public parks and golf courses. Graze still makes its products in California but aims to move production to Texas by the end of this year.

There were trade-offs: The region has less venture-capital funding for startups compared with places like California and New York. The company, which employs about 20 people, lost some workers who didn't want to relocate, Fahey Franz said. But the pool of engineering talent in Texas keeps growing, he said.

Compared with California tech hot spots, "it's gotten to the point where you can recruit, retain, and your cost is, I think we like to say, about 30% cheaper," Fahey Franz said, because of lower costs for labor and regulations.

Tapping into the growing talent pool there was a big draw for Abbyy, a business-automation company that moved to Austin from California last year, said PJ Jean, chief product and technology officer there. The company has 30 employees in Texas and 500 worldwide.

Texas does face some headwinds. The pace of tech job growth there has slowed in recent months, though the state continues to outpace the national trend, according to the Dallas Fed. One challenge is that artificial-intelligence data centers -- which have blossomed in Texas -- aren't proving to be major employers once construction is finished.

Manufacturing activity in Texas declined in February after a strong January, the Dallas Fed reported. Some computer and electronics manufacturers said uncertainty around potential tariffs by the new Trump administration was causing customers to pull back. Tariffs on imports could be negative for a state that serves as a major trade corridor with Mexico.

Analysts say one of the nation's most restrictive abortion bans also gives some companies pause about moving there.

Still, the state remains a big draw for movers from other states, even as net gains slow from pandemic peaks. Texas' population also skews younger than the national average, and its fertility rate is among the highest in the nation.

"Politics certainly matters, and policy certainly matters," said David Yim, chief investment officer at financial-services company USAA in San Antonio. "Pragmatism really for business and public companies is probably a bigger factor."

Texas is trying to leverage a new tool to get yet more companies to establish at least a foothold there: its own specialized business court. The court started work last year hearing complex commercial litigation, with judges appointed by Gov. Greg Abbott to two-year terms. Texas is among the states that launched such courts to try to attract companies and challenge the decadeslong dominance of Delaware's business courts.

Meta might move its incorporation to Texas from Delaware, The Wall Street Journal reported in January. The company said it had no further comment on the move.

Write to Harriet Torry at harriet.torry@wsj.com

(END) Dow Jones Newswires

March 01, 2025 10:00 ET (15:00 GMT)

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