Musk stocks dip as Democrats capture Texas governorship in midterm sweep

Democratic candidates secured major victories in the November midterm elections, a result that immediately impacted the stock prices of Elon Musk’s companies. Shares of SpaceX declined by 3.9 percent in premarket trading on Wednesday, while Tesla dropped 3.6 percent. The declines followed the confirmation that Democrats would hold or win key legislative seats and, more critically for the tech sector, the governorship of Texas.

The market reaction had been building since early Tuesday as results began to roll in. Investors had largely priced in a Democratic takeover of the House of Representatives and a potential Senate shift. The surprise element that moved tech stocks was the outcome of the race for the Texas governor’s mansion. Associated Press projections indicated that Democrat Gina Hinojosa was the victor over incumbent Republican Governor Greg Abbott.

Scott Ladner, chief investment officer at Horizon Investments, identified the Texas race as the primary variable for market direction earlier in the day. He noted that a loss for Abbott would raise legitimate questions about the location of new data center construction. Ladner described Texas as fertile ground for these projects, warning that a Democratic victory could turn that advantage into a challenge for the industry.

Hinojosa has been vocal in her support for a moratorium on AI data centers. This political stance carries heavy financial weight for the sector. According to Wells Fargo data, 27 percent of all planned data center gigawatts in the United States are located in Texas. A pause on new construction in that state would directly impact the supply chain for artificial intelligence infrastructure.

Stocks tied to the data center buildout suffered specific losses alongside Musk’s firms. CoreWeave, a neocloud provider that uses borrowed capital for construction, saw its shares sink 4.2 percent. Nebius Group lost 1.5 percent, and Oracle slipped 2.4 percent. The tech-heavy Nasdaq-100 futures remained flat, while the State Street Technology Select Sector SPDR ETF rose 0.7 percent, indicating a mixed reaction across the broader sector.

This political shift adds to existing pressure on the AI trade, which has driven recent market growth. The Nasdaq-100 index entered correction territory at the end of October. Analysts had grown concerned that spending by major hyperscalers and private AI firms like OpenAI and Anthropic was slowing. The election results reinforce the narrative that political headwinds are emerging for the sector.

Ohsung Kwon, chief equity strategist at Wells Fargo, stated in a report this week that the market reaction would hinge largely on the Texas governor’s race. He characterized a Democratic win in that state as a potential left-tail event for the AI trade. Kwon’s assessment aligns with the observed drop in stocks for companies with heavy exposure to data center expansion.

Democrats were also projected to win or retain governorships in Georgia, Pennsylvania, and Ohio. These states are also critical for data center development. Wells Fargo estimates that Georgia represents 7 percent of planned U.S. data center gigawatts. Ohio and Pennsylvania each account for 5 percent of the total. The collective Democratic gains in these regions suggest a coordinated political stance against rapid expansion.

Michael Hartnett, a noted investment strategist at Bank of America, warned earlier in the year that a Democratic Senate win combined with the Texas governorship could trigger a slump of more than 10 percent in stocks by year-end. The Optimal Advisory Washington policy team wrote this week that data centers have shifted from being a popular economic tool to a political pariah. They noted that the midterms send a message to local officials that there is a political upside to blocking, delaying, or raising the cost of data centers.

The immediate financial impact was felt in the premarket hours of Wednesday. The decline in SpaceX and Tesla shares followed the solidification of the Texas result. The performance of data center peers like CoreWeave and Oracle mirrored the broader unease in the sector. The market’s focus has now shifted to how state and local officials will implement the mandates suggested by the election outcomes.