SpaceX and Tesla Shares Fall After Texas Election Shift

A wave of Democratic victories in Tuesday’s midterm elections triggered a sharp decline in technology stocks on Thursday, with investors weighing the political fallout in states where new data centres are being built. The market sold off heavily after Democrats won key races, including a surprise victory in Texas, a state that has become a central battleground for artificial intelligence infrastructure.

SpaceX shares fell by more than 9% by lunchtime, while Tesla shares dropped by more than 11%. The losses extended to major chip manufacturers, with AMD stock falling over 14% and Micron shares down as much as 17% before a slight recovery. Nvidia shares lost nearly 9%, and Intel shares dropped by more than 7%. The Philadelphia Semiconductor Index fell by 10%, and the Nasdaq Composite index, which is weighted toward tech stocks, fell by more than 5% at one point during early trading.

Elon Musk spent nearly $450 million supporting Republican campaigns, including at least $45 million for Ken Paxton in the Texas senate race. Despite that financial backing, Texas turned blue in Tuesday’s results. Gina Hinojosa, the Texas governor-elect, campaigned on a platform that included a pledge to impose a moratorium on new data centre construction in the state.

Susannah Streeter, chief investment strategist at Wealth Club, said the steep sell-off in the Nasdaq and S&P 500 was sending shockwaves through other markets. She noted that fresh panic over the AI trade was hitting Wall Street hard. Streeter explained that fears regarding the returns on vast sums poured into AI infrastructure are colliding with the prospect of a sharp slowdown in data centre construction.

Industry leaders have acknowledged that the backlash against data centres caught them off guard. Greg Brockman, president and co-founder of OpenAI, spoke at the WSJ Tech conference in Napa, California, on Wednesday evening. He said the industry realized that building infrastructure in places like Texas and Georgia requires more than just announcing the project. "You need to be in those communities," Brockman said, adding that companies cannot simply tweet that a project is going to be good.

Dina Powell McCormick, president of Meta, agreed that the industry needs to improve how it communicates the benefits of AI. Telling the same conference, she said, "I think we need to double and triple down on telling the story." The S&P 500 index dropped by 3.8% by lunchtime on Thursday, reflecting the broad concern among investors that AI shares may be facing a correction.

The drop in stock prices followed a day when the market had already adjusted to the political changes. The reaction centered on the possibility of tougher scrutiny of data centre construction, particularly in states where Democrats made significant gains. The financial decline in tech stocks served as a direct measure of the uncertainty surrounding the future of AI expansion in the United States.