Shares of Elon Musk's SpaceX and Tesla fell in premarket trading Wednesday as the Democrats won a significant victory in the midterm elections.
SpaceX was last trading down 3.8% and Tesla dropped 3.5% amid big losses for Republican candidates Musk had backed.
Artificial intelligence stocks came under pressure overnight as Democrats — seen as proponents of data center moratoriums — won big in midterm elections in key data center hubs.
The Democrats' victory in Texas is a big setback for Musk, where he heavily backed Republican candidates and his companies Tesla and SpaceX are based. Musk spent $224 million in Texas, where Republican Senate nominee Ken Paxton and Gov. Greg Abbott lost to Democrats.
SpaceX is currently building out multiple gigawatts of data center capacity, including in some states that have seen swings towards Democrats.
"Data centers in space looking pretty appealing right now," Musk said in a post on X in the early hours on Wednesday, referring to his speculative plans to build AI infrastructure off-planet.
Mixed moves for AI stocks
The more direct plays were slightly down. Neoclouds CoreWeave and Iren fell by 2.6% and 2.8%, respectively. Peer Nebius Group was relatively flat and Oracle shed 1.3%.
Tech giants Nvidia , Alphabet , Meta , Amazon and Microsoft were all up around 1-2%. AMD shares rose 6.8% after announcing earnings on Tuesday.
Futures on the tech-heavy Nasdaq-100 were flat. The State Street Technology Select Sector SPDR ETF (XLK) was up 0.7%.
Markets were already anticipating the Democrats to win the House of Representatives and possibly take Senate control. But the Texas governor mansion going to Democrats was a big blow. Democrat Gina Hinojosa is the projected winner over incumbent Republican Gov. Greg Abbott, according to the Associated Press.
"The one thing that could really end up moving stuff though would be if Abbott were to lose Texas," said Scott Ladner, chief investment officer of Horizon Investments, earlier Tuesday as results rolled in. "Because there is a legitimate question about where do you build these data centers?"
"Texas is a fertile ground for that. And if he were to lose, I think that fertile ground is largely barren. So, that's going to be a challenge," Ladner added.
Hinojosa has been outspoken in her support of a moratorium on AI data centers. According to Wells Fargo, 27% of planned data center gigawatts is in the Lone Star State.
'Left-tail event'
The Democratic win in Texas adds to existing pressure on the bull-market-leading AI trade. The Nasdaq-100 index fell into correction territory to end October as concerns mounted that the growth of data center spending by big hyperscalers and private AI juggernauts OpenAI and Anthropic was slowing.
"We believe the equity market reaction from the midterms mostly depends on the outcome of the Texas governor's race — a Dem win could potentially be a left-tail event to the AI trade, warned Ohsung Kwon, Wells Fargo's chief equity strategist, in a report this week.
Democrats won or retained the governorships in other key data center states Georgia, Pennsylvania and Ohio. Georgia represents 7% of all the planned U.S. datacenter gigawatts, while Ohio and Pennsylvania account for 5% apiece, estimates Wells Fargo.
Notable investment strategist Michael Hartnett of Bank of America warned earlier this year that Democrats winning the Senate, combined with taking the Texas governorship could lead to a "big slump" in stocks of more than 10% into year-end.
"Data centers went from being a popular economic development tool in 2024 and 2025 to something of a pariah by the time the midterm campaigns gathered steam," wrote the Washington policy team at Optimal Advisory this week. "The midterms are likely to send a message to local and state officials that there is a political upside to blocking, delaying and/or raising the cost of data centers."
