Tesla, SpaceX Shares Fall as Democratic Midterm Wins Raise Concerns Over US AI Data...

Shares of Elon Musk's Tesla and SpaceX fell in premarket trading on Wednesday after Democratic candidates secured significant victories in the US midterm elections, raising concerns among investors about the political and regulatory outlook for large-scale artificial intelligence infrastructure projects.

SpaceX shares were last down 3.8%, while Tesla declined 3.5%, as Republican candidates backed by Musk suffered major losses, particularly in Texas, where both companies have substantial operations.

The election results have drawn attention to the future of data center development in the United States. Democratic candidates have supported restrictions on new AI data center projects, citing concerns about electricity consumption, infrastructure pressure, and the impact on local communities.

The prospect of tougher permitting conditions or moratoriums has become a new risk for companies investing heavily in AI computing capacity. SpaceX is building out multiple gigawatts of data center capacity, including projects in Texas, making the state's political direction particularly important to its expansion plans.

Musk, who spent at least $474 million supporting candidates during the midterm elections, directed $224 million towards races in Texas, according to the report. Republican Senate nominee Ken Paxton and incumbent Governor Greg Abbott lost to Democratic candidates, delivering a major setback to the political campaign backed by the billionaire.

Democrat Gina Hinojosa was projected by the Associated Press to defeat Abbott in the Texas governor's race.

Hours after the results emerged, Musk posted on X: "Data centers in space looking pretty appealing right now." The comment referred to his speculative plans to develop AI infrastructure beyond Earth, although the technology and commercial feasibility of such projects remain uncertain.

Texas has become a major destination for data center investment because of its available land, energy resources, and business environment. A change in the state's political leadership could alter the regulatory conditions facing developers, particularly if proposals for restrictions on new facilities gain traction.

Hinojosa has publicly supported a moratorium on AI data centers. That position has attracted attention from investors because Texas accounts for 27% of planned US data center capacity measured in gigawatts, according to Wells Fargo estimates.

The potential consequences extend beyond SpaceX and Tesla. Technology companies and infrastructure providers have committed substantial capital to building facilities that support AI model training, cloud computing and other high-performance workloads. Delays in approvals, higher development costs or restrictions on electricity access could affect the timing and economics of those investments.

Scott Ladner, chief investment officer of Horizon Investments, identified the Texas governor's race as a significant factor for markets before the results were known.

"The one thing that could really end up moving stuff though would be if Abbott were to lose Texas," Ladner said on Tuesday. "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," he added.

Democrats also won or retained governorships in other states that are important to the data center industry, including Georgia, Pennsylvania and Ohio. Wells Fargo estimates that Georgia accounts for 7% of planned US data center capacity, while Ohio and Pennsylvania each represent 5%.

The results could encourage state and local officials to take a tougher position on new projects, particularly in areas where residents have raised concerns about power demand, water use and pressure on electricity infrastructure.

Optimal Advisory's Washington policy team described the shift in political attitudes towards data centers in a report this week.

"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," the team wrote.

"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."

The election-related pressure on Musk's companies coincided with mixed trading across the AI sector. Shares of data center operators and infrastructure providers declined, while several large technology companies advanced.

Neocloud providers CoreWeave and Iren fell 2.6% and 2.8%, respectively. Nebius Group was little changed, while Oracle lost 1.3%.

By contrast, Nvidia, Alphabet, Meta, Amazon and Microsoft gained around 1% to 2%. Advanced Micro Devices rose 6.8% after reporting earnings on Tuesday. Nasdaq-100 futures were flat, while the State Street Technology Select Sector SPDR ETF gained 0.7%.

The different share-price movements suggest investors were not treating the election outcome as a uniform threat to every company involved in AI. Infrastructure developers with direct exposure to data center construction and local permitting face a different set of risks from technology companies whose businesses span advertising, software, cloud services and chip sales.

The political developments also arrive as investors are already questioning the scale and sustainability of AI-related capital expenditure. The Nasdaq-100 entered correction territory at the end of October amid concerns that spending growth by major cloud providers and private AI companies, including OpenAI and Anthropic, could slow.

Wells Fargo chief equity strategist Ohsung Kwon had warned that a Democratic victory in Texas could represent a major downside risk for AI-related stocks.

"We believe the equity market reaction from the midterms mostly depends on the outcome of the Texas governor's race," Kwon wrote in a report this week. "A Dem win could potentially be a left-tail event to the AI trade."

Bank of America investment strategist Michael Hartnett had also warned earlier in the year that Democrats winning the Senate alongside the Texas governorship could trigger a stock market decline of more than 10% towards year-end.

The election results do not automatically mean that planned data center projects will be cancelled or that state governments will impose moratoriums. The immediate risk for investors is that political opposition could make projects slower, more expensive, or harder to approve.