Shares in Elon Musk SpaceX and Tesla tumble as tech sector faces post-election pressure

The broader technology sector and artificial intelligence stocks faced a sharp downturn following the recent US midterms, with shares in Elon Musk SpaceX and Tesla experiencing notable declines. Market volatility intensified a day after the Democratic party secured significant victories, triggering concerns among investors regarding the future regulatory landscape for the tech industry.

In early Friday trading, SpaceX shares fell by more than 7%, while Tesla shares saw a decline exceeding 9%. These losses contributed to a broader sell-off across the tech-heavy Nasdaq Composite index, which at one point during early trading sessions had dropped by more than 5%. The semiconductor sector was hit particularly hard; over the past five days, AMD shares have fallen nearly 17%, Micron has dropped over 20%, and Intel has declined by more than 18%. Furthermore, Nvidia shares have slipped by over 10%, contributing to a 13% decline in the Philadelphia Semiconductor Index.

Tech stocks and AI companies face market volatility following Democratic gains in the US midterms.

Market reaction to data centre scrutiny

The market downturn is largely attributed to expectations of tougher scrutiny regarding data centre construction and the AI industry. The Democratic victory in key states, including Texas, has raised alarms for tech leaders. Notably, Texas governor-elect Gina Hinojosa campaigned on a platform that included a proposed moratorium on new data centre construction. This shift in the political climate in Texas is significant, especially given that Elon Musk had previously invested nearly $450 million in Republican campaigns, including support for Ken Paxton’s Texas senate bid.

Industry leaders have admitted that the backlash against data centre expansion caught them off guard. At the WSJ Tech conference in Napa, California, OpenAI president Greg Brockman noted that the industry must improve its engagement with local communities rather than relying solely on digital communication. Meta president Dina Powell McCormick echoed these sentiments, emphasizing that the tech sector needs to communicate more effectively about the tangible benefits of artificial intelligence to the public.

Beyond the immediate political fallout, some investors are expressing concerns that the AI sector may be experiencing a bubble that is overdue for a correction.

Why it matters

The shift in political power is forcing a re-evaluation of how tech infrastructure is deployed across the United States. With stricter oversight looming for data centres, companies are being pushed to prioritize community relations and transparency.

For global investors and those in the technology sector, this represents a pivot from rapid, unchecked expansion toward a more regulated environment. The outcome of the midterms suggests that the social and environmental impact of AI infrastructure will remain a central point of contention for policymakers moving forward.