AI stocks slide as Democrats flip Texas, putting data center buildout on notice

Artificial intelligence stocks took a beating overnight as Democrats romped through the midterms, and the result that stung hardest came out of Texas. Gina Hinojosa is the projected winner of the governor's mansion, knocking off incumbent Republican Greg Abbott, according to the Associated Press. Tech traders had already braced for Democrats to take the House and possibly the Senate — but Texas is the one they were watching.

Futures on the tech-heavy Nasdaq-100 slid 2%, more than double the drop in Dow Jones Industrial Average futures. The State Street Technology Select Sector SPDR ETF (XLK) lost 2% on Robinhood. The direct data center plays got hit harder: CoreWeave, the high-risk neocloud that borrows heavily to build, fell 7%, while Nebius Group dropped 4% and Oracle shed 4%. Elon Musk's AI data play SpaceX, which calls Texas home, was off 6%.

The problem is geography. Hinojosa has been loud about backing a moratorium on AI data centers, and Texas isn't a side venue — it's the venue. Wells Fargo estimates 27% of planned U.S. data center gigawatts sit in the Lone Star State. Horizon Investments chief investment officer Scott Ladner called Texas fertile ground for the buildout and said that if Abbott lost, that ground largely goes barren, leaving a real question about where these facilities actually get built.

It isn't just Texas. Democrats were projected to win or hold governorships in Georgia, Pennsylvania and Ohio — three more data center states. Georgia accounts for 7% of planned U.S. gigawatts, with Ohio and Pennsylvania at 5% apiece, per Wells Fargo estimates.

The selloff lands on an AI trade that was already wobbling. The Nasdaq-100 closed October in correction territory as worries grew that data center spending by the big hyperscalers — and by OpenAI and Anthropic — was losing steam. Wells Fargo chief equity strategist Ohsung Kwon warned that the midterm market reaction hinged on Texas, calling a Democratic win a potential left-tail event for the AI trade. Bank of America's Michael Hartnett had flagged earlier this year that Democrats taking the Senate plus the Texas governorship could trigger a slump of more than 10% into year-end.

The politics around these projects have flipped fast. Optimal Advisory's Washington policy team wrote this week that data centers went from a popular economic development tool in 2024 and 2025 to something close to a pariah as campaigns heated up, and that the midterms are likely to signal to local and state officials that there's political upside in blocking, delaying or making data centers more expensive.