SpaceX, Tesla stocks sink as analyst warns Democrats' victory will create 'major hurdles' for AI build-out

One of Wall Street’s biggest AI bulls says the sweeping Democratic victory in the midterm elections will slow the pace of the AI data center build-out in the US over the next two years.

AI related stocks dropped on Wednesday, including Elon Musk-led SpaceX (SPCX) and EV maker Tesla (TSLA), which fell 7% and 5%, respectively. Shares of cloud provider CoreWeave (CRWV) and data center-related companies IREN (IREN) and Vertiv (VRT) also traded lower on Wednesday after Democrats won a majority in the House and Senate on Tuesday night and flipped governorships across key states.

“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,” Yorkville’s partner and managing director, Dan Ives, wrote on Wednesday.

Those hurdles, Ives said, will slow the pace of 800 to 1,000 planned AI data centers across the US. The analyst pointed out that the biggest worry for tech investors and the AI trade is the state of Texas, where around 25%-30% of data center gigawatts and capacity will come from.

Democrat Gina Hinojosa won the Texas Governor race over incumbent Greg Abbott in a surprise result. While Abbott currently has a moratorium on data centers in Texas, the prevailing view was that it would have ended were he reelected.

“Hinojosa is a known anti-data center politician and negative on the AI buildout, which makes worries around the future of the data center buildout in Texas a real issue for tech investors,” Ives said.

Tesla and SpaceX caught ‘in this spiderweb’

This poses a problem for companies like Texas-based SpaceX, which has been building out its AI infrastructure and taking steps toward a potential merger with Tesla.

“SpaceX and Musk are clearly caught front and center in this spiderweb,” said Ives.

“There will be a lot of negotiations and politics on this front especially in Texas which is the foundation of the AI buildout in the US … and Big Tech will need to embrace this new political landscape as of today,” he added.

“Data centers in space looking pretty appealing right now,” Elon Musk wrote on X following the election results.

Data center concerns emerged as a key issue in the 2026 midterm elections, with candidates facing growing public opposition to proposed facility locations, the expansion of power infrastructure needed to support them, and concerns that rising electricity demand could drive up consumer costs.

One silver lining for investors may be that political headwinds will force a slowdown in AI capex. AI-related jitters have already weighed on the tech (XLK) sector in recent weeks, with financing concerns hitting neocloud providers that rent out computing capacity, while semiconductor stocks have also retreated.