Elon Musk suffers political setback in 2026 midterms

Democrats’ sweeping midterms victory marked a major rejection of Elon Musk and the artificial-intelligence industry, as a broad backlash against U.S. President Donald Trump and his tech allies put their political influence — and the debt-fueled data center buildout — under sharper scrutiny.

Musk, who spent a record of at least $474 million on the midterms, funneled $224 million, or nearly half, into Texas alone, according to a CNBC analysis of campaign finance records, only to see his favored candidates, Republican Senate nominee Ken Paxton and Gov. Greg Abbott, trounced in a Democratic wave.

The defeats rattled markets overnight, sending SpaceX and Tesla shares lower, both of which have long flourished under Abbott’s business-friendly. Meanwhile, broader tech stocks came under pressure as Democrats secured control of Congress.

Across the country, voters pushed back against billionaire influence and the growing power of technology companies, electing critics of the AI industry and approving restrictions on data centers fueling its expansion.

“We must get big money out of our politics, so no billionaire or trillionaire can buy our elections,” Democratic Senator-elect James Talarico said in his victory speech, without naming Musk. “We must unrig this economic system that only benefits the top 1%.”

J.C. Lintzenich, a visiting senior fellow at the German Marshall Fund, pointed to Musk’s massive spending in Texas, telling CNBC’s “Squawk Box Europe” on Wednesday that the results were “clearly a rejection of the Elon Musk aspect that has found its way into the Trump orbit.”

Texas has grown to be homebase for much of Musk’s Empire. Tesla operates its largest U.S. vehicle factory outside Austin, SpaceX launches rockets from its Starbase complex in South Texas, and Musk is pursuing additional investments in AI and semiconductor manufacturing.

These operations rely heavily on state decisions regarding electricity, water, environmental permits, infrastructure, and tax incentives. Democratic Governor-elect Gina Hinojosa — who campaigned against generous corporate subsidies, and Musk himself — will wield significant influence over those decisions.

Hinojosa has called for a moratorium on new data centers, an end to industry tax breaks and requirements that developers cover their full electricity costs. In her victory speech Tuesday, she vowed to take power from the “powerful people who have gotten very comfortable running this state.”

Republicans still control the Legislature, limiting Hinojosa’s ability to overhaul state policy. But her administration could complicate Musk’s expansion plans with a tougher approach to permitting and business incentives.