The United States Capitol in Washington, DC, United States, Tuesday, November 3, 2026.
Aaron Schwartz | Bloomberg | Getty Images
Elon Musk’s actions EspaceX And Tesla fell in premarket trading Wednesday as Democrats scored a significant victory in the midterm elections.
SpaceX was last trading down 4.6% and Tesla was down 4.4% amid significant losses for Musk-backed Republican candidates.
AI stocks came under pressure overnight as Democrats – seen as supporters of data center moratoriums – scored big wins in midterm elections in major data center hubs.
SpaceX and Tesla have been sharing since the beginning of the year.
The Democratic victory in Texas is a major setback for Musk, where he has strongly supported Republican candidates and where his companies Tesla and SpaceX are based. Musk spent a record of at least $474 million in the midterms and funneled $224 million to Texas alone, where Republican Senate candidate Ken Paxton and Gov. Greg Abbott lost to Democrats.
SpaceX is currently building several gigawatts of data center capacity, including projects in Texas.
The midterm elections will slow the pace of data center construction in the United States, Dan Ives, a partner at Yorkville Ives & Co., said in a note Wednesday morning.
“There is no way to hide that Democrats taking control, particularly of the Senate, will create major obstacles to legislation on AI and technology in the Beltway over the next two years,” he said.
He added that the Texas election was the “biggest worry” of the evening for tech investors and the AI business, because that’s where about 25% to 30% of the gigawatts and data center capacity will come from.
“Data centers in space look pretty attractive right now,” Musk said in an article on X Wednesday morning, referring to his speculative plans to build AI infrastructure off-planet.
Follow CNBC’s live coverage of the 2026 midterm elections
Mixed Moves for AI Stocks
The most direct pieces were mixed. Neoclouds CoreWeave And Irene decreased by 0.8% and 1.9% respectively. Peer Nebius Group was up 2.9% and Oracle lost 1.3%.
Tech giants Nvidia, Alphabet, Meta And Microsoft were all up about 1-2%, with Amazon up 2.7%. AMD shares rose 6.3% after Tuesday’s earnings announcement.
Futures on the Nasdaq-100, with a strong technological component were up 1%. THE State Street Technology Select Sector SPDR ETF (XLK) was up 1.5%.
Markets already expected Democrats to win the House of Representatives and possibly take control of the Senate. But the transfer of the Texas governor’s mansion to the Democrats was a major blow. Democrat Gina Hinojosa is the projected winner over incumbent Republican Gov. Greg Abbott, according to the Associated Press.
“The only thing that could really cause things to move would be if Abbott lost Texas,” Scott Ladner, chief investment officer of Horizon Investments, said Tuesday as the results came in. “Because there’s a legitimate question about where are you building these data centers?”
“Texas is fertile ground for that. And if they were to lose, I think that fertile ground is largely barren. So it’s going to be a challenge,” Ladner added.
Hinojosa has clearly expressed support for a moratorium on AI data centers. According to Wells Fargo, 27% of the gigawatts planned for data centers are in the Lone Star State.
“Left-wing event”
The Democratic victory in Texas adds to existing pressure on the AI bull market. The Nasdaq-100 index fell into correction territory through late October as concerns grew over slowing growth in data center spending by large hyperscalers and private AI behemoths OpenAI and Anthropic.
“We believe the stock market’s reaction to the midterms depends primarily on the outcome of the Texas governor’s race – a Democratic victory could potentially be a left-wing event for the AI trade,” Ohsung Kwon, Wells Fargo’s chief equity strategist, warned in a report this week.
Democrats won or retained governorships in other key data center states, Georgia, Pennsylvania and Ohio. Georgia accounts for 7% of all gigawatts planned for U.S. data centers, while Ohio and Pennsylvania account for 5% each, Wells Fargo estimates.
Famed investment strategist Michael Hartnett of Bank of America warned earlier this year that the Democrats’ Senate victory, combined with the Texas gubernatorial race, could lead to a “sharp decline” in stocks of more than 10% by the end of the year.
“Data centers went from a popular economic development tool in 2024 and 2025 to something of a pariah as the midterm campaigns gained momentum,” the Washington policy team at Optimal Advisory wrote this week. “The midterm elections will likely send a message to local and state officials that there is a political advantage to blocking, delaying and/or increasing the cost of data centers.”
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