State Rep. Gina Hinojosa, the 2026 Democratic nominee for Texas governor, speaks at an Arlington, Texas, campaign rally on Sunday, Sept. 27, 2026. She faces Gov. Greg Abbott, a Republican, in the Nov. 3 general election. (Eleanor Dearman/Fort Worth Star-Telegram/Tribune News Service via Getty Images)
Eleanor Dearman | Fort Worth Star-Telegram | Getty Images
AI data center stocks came under pressure as Democrats — seen as proponents of moratoriums on the buildout — won big in midterm elections and in key technology hubs like Texas.
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, analysts said. Democrat Gina Hinojosa, who wants to enact an immediate moratorium on data centers in the state, won over incumbent Republican Gov. Greg Abbott. According to Wells Fargo, 27% of planned data center gigawatts is in the Lone Star State.
The midterm elections will slow the pace of data center buildouts across the U.S., Dan Ives, partner at Yorkville Ives & Co., said in a note on Wednesday morning.
"There is no way to sugarcoat that Democrats taking control especially over the Senate will create some major hurdles for AI and tech legislation in the Beltway over the next 2 years," he said.
He added that the election in Texas was the "biggest worry" of the night for tech investors and the AI trade because that's where around 25%-30% of data center gigawatts and capacity will come from.
Shares of Elon Musk's SpaceX were down 4% after the open, and Tesla shares were down 5%. The Democrats' victory in Texas is a big setback for Musk, where he heavily backed Republican candidates, and where his companies Tesla and SpaceX are based. Musk spent a record of at least $474 million on the midterms and funneled $224 million into Texas alone, 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 projects in Texas.
"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.
Neoclouds CoreWeave and Iren fell by 4% in morning trading on Wednesday. Peer Nebius Group was down about 0.5% and Oracle was up 2%. Nvidia shares were slightly in the red.
Tech giants Alphabet, Meta and Microsoft mostly bucked the trend and were higher. Alphabet was up 3%, Amazon was up 7%, Meta was up 2%, and Microsoft was up 5.5%.
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."