AI stocks slide as Texas election outcome deepens data center policy risk

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AI stocks slide on Texas policy

Highlights

Democrat Gina Hinojosa's win in the Texas governor race triggered a deep selloff in AI and data center stocks, with the Nasdaq-100 futures down 2%.
CoreWeave fell 7%, SpaceX dropped 6%, Oracle lost 4%, and XLK ETF declined 2% amid worries Texas—home to 27% of planned data center gigawatts—may restrict expansion.
Wells Fargo warns Democratic gains in key states like Texas, Georgia (7% share), Ohio, and Pennsylvania (5% each) could drive more political resistance to data center projects.

Texas result drives overnight selloff

As reported by CNBC, citing the Associated Press, Democrat Gina Hinojosa is the projected winner over incumbent Republican Gov. Greg Abbott in Texas, a result investors are treating as a significant risk for AI-linked infrastructure spending.

Futures on the tech-heavy Nasdaq-100 are down 2%, more than double the decline in Dow Jones Industrial Average futures. The State Street Technology Select Sector SPDR ETF, XLK, is down 2% on the Robinhood trading platform, while more direct AI and data center plays are falling more sharply.

CoreWeave, which relies on borrowed money to build data centers, is off 7% on Robinhood, while Nebius Group falls 4%. SpaceX, Elon Musk's AI data play headquartered in Texas, is down 6%, and Oracle loses 4%.

Scott Ladner, chief investment officer of Horizon Investments, says earlier on Tuesday that a loss for Abbott could materially shift investor thinking because Texas has been a key location for data center construction. He says the state is fertile ground for such projects and warns that a political shift could make expansion there far more difficult.

Hinojosa has been outspoken in supporting a moratorium on AI data centers. Wells Fargo estimates that 27% of planned data center gigawatts are in Texas, making the state central to the buildout assumptions behind many AI-related stocks.

Broader pressure builds on AI trade

The Texas result is adding to existing strain on the AI trade, which has already been losing momentum as investors question whether spending growth by hyperscalers and companies such as OpenAI and Anthropic is slowing. The Nasdaq-100 fell into correction territory at the end of October as those concerns mounted.

Wells Fargo chief equity strategist Ohsung Kwon warns that the market reaction to the midterms largely depends on the Texas governor's race, with a Democratic win representing a possible left-tail event for AI stocks. Democrats are also projected to win or retain governorships in other important data center states, including Georgia, Pennsylvania and Ohio.

Wells Fargo estimates Georgia represents 7% of planned U.S. data center gigawatts, while Ohio and Pennsylvania account for 5% each. Earlier this year, Bank of America investment strategist Michael Hartnett warns that a Democratic Senate win combined with a Democratic victory in the Texas governor's race could trigger a stock slump of more than 10% into year-end.

Optimal Advisory's Washington policy team says data centers have shifted from being a favored economic development tool in 2024 and 2025 to a political liability as midterm campaigns gather pace. The firm says the elections are likely to encourage more local and state officials to block, delay or raise the cost of data center projects.

In our earlier article on the growing strains in U.S. AI data center buildouts, we examined how higher financing costs, construction delays, and power constraints are making many expansion plans look less credible. We also noted that investor confidence has been wobbling as projects face overruns and local opposition—pressures that are particularly visible in Texas and in names such as CoreWeave.

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