Texas governor race shift drops AI data center stocks 4%

Shares of SpaceX and Tesla declined in premarket trading on Wednesday following Democratic victories in the midterm elections. SpaceX fell by 3.9% while Tesla dropped 3.6%. These losses followed strong performances for Democratic candidates in states with substantial planned data center capacity.

The market had already priced in a likely Democratic win in the House of Representatives. However, the projected defeat of incumbent Texas Governor Greg Abbott by Democrat Gina Hinojosa appeared to be the primary driver for the tech sector selloff. Hinojosa is a vocal supporter of a moratorium on new AI data centers. According to Wells Fargo, Texas currently accounts for 27% of all planned data center gigawatts in the United States.

Scott Ladner, chief investment officer at Horizon Investments, noted the geographical impact of the race. He stated that Texas is fertile ground for data centers, but a Democratic win would turn that ground barren. This shift creates a direct challenge for companies planning to build infrastructure in the state.

Pressure extended to other artificial intelligence stocks overnight. CoreWeave, a company that uses borrowed money to construct data centers, fell by 4.2%. Nebius Group dropped 1.5% and Oracle fell by 2.4%. The Nasdaq-100 futures were flat, while the State Street Technology Select Sector SPDR ETF rose by 0.7%.

Wells Fargo strategist Ohsung Kwarned in a report this week that a Democratic win in Texas could be a left-tail event for the AI trade. The Nasdaq-100 index had already fallen into correction territory by the end of October. This drop reflected growing concerns that spending on data centers by large tech firms and AI companies like OpenAI and Anthropic was slowing down.

Democrats are also projected to win or retain governorships in Georgia, Pennsylvania, and Ohio. These three states represent another 17% of planned U.S. data center gigawatts combined. Michael Hartnett of Bank of America warned earlier this year that a Democratic sweep of the Senate and the Texas governorship could cause a stock slump of more than 10% by the end of the year.

Optimal Advisory noted that data centers shifted from being popular economic tools in 2024 and 2025 to political targets during the midterm campaigns. The firm believes the election results will encourage local and state officials to block, delay, or raise the cost of these projects.