- Texas was the result that mattered for tech. Democrat Gina Hinojosa was projected by the Associated Press to defeat Republican Gov. Greg Abbott after campaigning for an immediate moratorium on data centers and an end to tax incentives for the build-out. Nasdaq-100 futures fell 0.8%, more than double the decline in Dow futures, and the Technology Select Sector SPDR ETF (XLK) fell 2% on Robinhood.
- Direct AI plays took the biggest hits. CoreWeave, which uses borrowed money to build data centers, fell 7% on Robinhood, Nebius Group dropped 4% and Oracle lost 4%. Texas-headquartered SpaceX fell more than 6% and Tesla more than 4% in overnight trading.
- The map is the problem. Texas accounts for 27% of planned US data center gigawatts, according to Wells Fargo, and Democrats were also projected to win or keep the governorships of Georgia at 7% and Ohio and Pennsylvania at 5% each. Together, those four states hold about 44% of planned US capacity, by our calculation from Wells Fargo’s estimates.
- Strategists had flagged this scenario. Wells Fargo chief equity strategist Ohsung Kwon wrote that a Democratic win in Texas “could potentially be a left-tail event to the AI trade,” and Bank of America’s Michael Hartnett warned earlier this year that Democrats winning the Senate plus the Texas governorship could bring a “big slump” of more than 10% in stocks into year-end.
What Happened?
AI stocks came under pressure overnight as Democrats, seen as supporters of data center moratoriums, won big in the midterms. Markets had largely expected Democrats to take the House and possibly the Senate, but the Texas governorship appeared to be the biggest blow to tech shares. “The one thing that could really end up moving stuff though would be if Abbott were to lose Texas,” Horizon Investments CIO Scott Ladner said as results came in. “Because there is a legitimate question about where do you build these data centers?”
Why It Matters?
The result adds to pressure on a trade that was already weakening: the Nasdaq-100 fell into correction territory at the end of October on concerns that data center spending growth by hyperscalers, OpenAI and Anthropic was slowing. Texas has been “fertile ground” for data centers, Ladner said, and “if he were to lose, I think that fertile ground is largely barren.” Freedom Capital Markets’ Jay Woods said investors should watch Tesla, SpaceX and other companies that moved to Texas from California. The most leveraged builders, such as CoreWeave, are the most exposed if projects are delayed.
What’s Next?
Investors now need to know how fast state-level restrictions could slow projects in the biggest buildout markets. Optimal Advisory’s Washington policy team wrote that data centers went from a popular economic development tool to “something of a pariah,” and that the midterms are likely to show local and state officials “there is a political upside to blocking, delaying and/or raising the cost of data centers.” Watch for Hinojosa’s first moves on a moratorium and tax incentives, and for whether the overnight losses deepen once regular trading opens.
Affected Tickers and Coins: CRWV, NBIS, ORCL, TSLA, XLK, QQQ
