Shares in companies linked to artificial intelligence weakened in overnight trading following significant Democratic gains in the US midterm elections.
A particular source of concern for investors was the Texas gubernatorial race. According to projections by the Associated Press, Democrat Gina Hinojosa defeated Republican Greg Abbott.
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Texas is highly important to the technology industry, especially for building data centers, infrastructure essential to the development and operation of artificial intelligence.
The moves were also reflected in futures contracts on major indexes. Nasdaq-100 futures fell 0.8%, recording losses more than twice as large as those in Dow Jones Industrial Average futures.
Companies directly tied to investment in AI infrastructure came under greater pressure: CoreWeave shares fell 7%, while those of rival Nebius Group dropped 4%. SpaceX, the Texas-based company owned by Elon Musk, which also develops artificial intelligence projects, lost 6%. Oracle shares, meanwhile, fell 4%.
Why is Texas particularly important to the technology industry?
Investors had factored in the possibility that Democrats would win in Congress, but the outcome of the Texas gubernatorial election appears to have raised questions about future investment in the state.
Favorable conditions have made Texas a leading destination for the construction of new data centers. However, a possible shift in political direction could affect technology companies’ plans.
Gina Hinojosa has supported imposing a moratorium on the construction of new data centers that serve artificial intelligence. Restricting construction could hinder the expansion of technology infrastructure and affect the plans of companies investing billions of dollars in the sector.
Scott Landner, chief investment officer at Horizon Investments, had previously warned that a possible defeat for Abbott could significantly change the outlook for data center development in Texas.
Wells Fargo data show that around 27% of the total data center capacity planned in the US is expected to be built in Texas. This high share helps explain the markets’ reaction to political developments in the state.
Investors are closely watching how political changes could affect technology companies’ expansion plans, as demand for computing power and artificial intelligence infrastructure grows rapidly.
