The Democratic Party's landslide victory in the midterm elections signals a major rebuke of Elon Musk and the artificial intelligence industry. The widespread backlash against U.S. President Donald Trump and his tech allies has also brought greater scrutiny to their political influence and the debt-fueled boom in data center construction.
According to CNBC’s analysis of campaign finance records, Musk spent at least $474 million in this midterm election, setting a record. Of this, $224 million—nearly half—went to Texas; however, the candidates he supported—Republican Senate nominee Ken Paxton and Governor Greg Abbott—suffered decisive defeats amid the Democratic wave.
These losses weighed on markets overnight, causing shares of SpaceX and Tesla to decline. Both companies have long benefited from Abbott’s business-friendly policy environment. Meanwhile, as Democrats gained control of Congress, broader technology stocks also came under pressure.
Across the United States, voters opposed the influence of billionaires and the growing power of tech companies, electing candidates critical of the AI industry and approving measures to limit data centers driving its expansion.
Elected Senator James Talarico said in his victory speech: “We must get big money out of our political system so that no billionaire or trillionaire can buy our elections.” He did not name Musk. He also said: “We must fix an economic system that only benefits the top 1%.”
J.C. Lintzenich, Senior Visiting Fellow at the German Marshall Fund, highlighted Musk’s massive spending in Texas. He said on CNBC’s Squawk Box Europe on Wednesday that this outcome “is clearly a rebuke of the Musk factor, which has already aligned with Trump.”
Texas has become the headquarters of Musk's empire. Tesla operates its largest U.S. car factory near Austin, SpaceX launches rockets from Starbase in southern Texas, and Musk is also advancing additional investments in artificial intelligence and semiconductor manufacturing.
These operations heavily depend on state government decisions regarding electricity, water resources, environmental permits, infrastructure, and tax incentives. Democratic governor-elect Gina Hinojosa, who campaigned on opposing generous corporate subsidies and Elon Musk himself, will wield significant influence over these decisions.
Cinohosa called for a halt to new data center construction, the elimination of industry tax incentives, and required developers to bear the full cost of electricity. In her victory speech on Tuesday, she pledged to take power back from “those who have become accustomed to governing this state.”
The Republican-controlled state legislature still limits Sinohosa’s ability to enact sweeping reforms to state policy. However, her administration may introduce stricter licensing reviews and business incentive policies to create additional obstacles for Musk’s expansion plans.
Nationwide losses
According to an analysis of Federal Election Commission (FEC) filings by CNBC, Musk’s America PAC spent nearly $87 million across 44 federal races. As of Wednesday morning, Republican candidates supported by the organization had lost 29 races, won only 3, and 12 remained undecided. Over $80 million, or 93%, of the spending went toward races that ultimately resulted in Republican defeats.
This outcome means that Musk will have fewer allies in a Democratic-controlled Congress. Congress may investigate his federal contracts, his past leadership of Trump’s Department of Government Efficiency, and his companies’ ties to Washington.
Congressional oversight may slow down SpaceX’s lucrative and rapidly growing government contracts, but Trump still controls the executive branch and holds veto power, limiting the Democrats’ ability to reverse policies favorable to Musk’s defense technology business.
These setbacks are not the first time Musk's political spending has failed to produce the results he wanted.
America PAC supported eight losing congressional candidates in 2024, and last year, Musk spent over $20 million attempting to elect a conservative candidate in Wisconsin. Despite Musk’s pledge last year to spend “much less” on politics, he ultimately became the largest known donor in the 2026 midterm elections.
Long-term Tesla investor Ron Baron warned in March 2025 that Musk’s political activities could drive away customers, telling CNBC: “I don’t think alienating half the population is a good thing.”
Some also welcome Musk’s close relationship with Trump and his influence on matters ranging from regulation to Pentagon technology spending.
Tech sector rebounds
Elon Musk is not the only one making big investments.
According to FEC filings, OpenAI President Greg Brockman and his wife Anna donated $25 million to the political organization Leading the Future, which seeks to influence AI regulation. The venture capital firm Andreessen Horowitz contributed an additional $50 million.
Although the industry has achieved some victories—such as defeating New York Representative Alex Bores, who advocated for stricter AI safety measures, in a Democratic congressional primary—gaining support from local communities has been much more difficult.
In Ohio, Democrat Sherrod Brown defeated Republican Senator Jon Husted, campaigning against his support for data centers. According to AdImpact, Democrats spent nearly $28 million on advertisements criticizing data centers.
In South Carolina, Democrat Annie Andrews defeated Republican Senator Darline Graham, despite the newly formed super PAC Building the Future significantly increasing its advertising efforts late in the race and naming Graham as its top endorsed candidate. The organization allocated $1.5 million in advertising support for Graham, while Andrews advocated for a two-year moratorium on new data center construction.
According to AdImpact, campaign teams and outside organizations spent $173 million on advertisements related to data centers across the country during the 2026 election cycle, nearly all of which were negative ads. Democratic advertisers accounted for $140 million of this amount. On Tuesday, voters also weighed in on 41 local data center proposals, with at least 10 communities approving bans or restrictions.
The stakes on the financial level are extremely high.
J.P. Morgan Asset Management estimates that the total cost of AI infrastructure construction could reach approximately $5 trillion by 2030, with about $2 trillion financed through the investment-grade bond market.
These projects cannot generate expected returns until they are fully operational. Delays in permitting approvals may postpone completion and revenue recognition, while higher utility and borrowing costs will increase project expenses, making it harder to achieve expected returns.