Shares in Musk's SpaceX Plunge as Tech and AI Stocks Fall After Midterms

Shares in Elon Musk's SpaceX have plunged as technology and artificial intelligence stocks more broadly plummeted a day after the Democrats swept to victory in the midterms.

Those losses dragged the tech-heavy Nasdaq Composite stock index down, which had fallen by more than 5% at one point in early trading on Thursday. SpaceX shares were down more than 9% by lunchtime in Thursday trading, while Tesla shares dropped more than 11%.

The market has been reacting to possible tougher scrutiny of data centre construction and the artificial intelligence industry following Democrat wins in key data centre states including Texas.

Musk had spent nearly $450m backing Republican campaigns, including at least $45m in support of Ken Paxton for the Texas senate seat, but Texas was turned blue in the Democratic tsunami on Tuesday night.

Texas governor-elect Gina Hinojosa campaigned heavily against data centres, pledging a moratorium on new construction in the sector.

Shares in chipmakers have also been suffering, with AMD dropping more than 14% on Thursday, while Micron shares had dropped by as much as 17% before recovering slightly. Intel shares are down by more than 7% and shares in Nvidia have fallen nearly 9%, while the Philadelphia Semiconductor Index had fallen by 10%. The stock falls also hit the S&P 500 index, which dropped by 3.8% by lunchtime.

Susannah Streeter, chief investment strategist at Wealth Club, said the steep sell-off on the Nasdaq and the S&P 500 was sending shockwaves into other markets. She said fresh panic over the AI trade has hit Wall Street hard, and fears that the vast sums poured into AI infrastructure may not deliver the returns investors have been banking on are now colliding with the prospect of a sharp slowdown in data centre construction.

Some tech leaders have said they were caught off guard by the backlash against data centres in the midterms. OpenAI president and co-founder Greg Brockman said he believed everyone had been surprised by the reaction to data centres, and more work needed to be done to ensure communities were on board. Speaking at the WSJ Tech conference in Napa, California on Wednesday evening, he said that trying to build infrastructure in Texas, Georgia and other places from San Francisco, you cannot just tweet and say this is going to be good; you need to be in those communities.

Meta's president Dina Powell McCormick also agreed at the conference that the industry needed to improve its communication about the benefits of AI. She said they need to double and triple down on telling the story.

Alongside the immediate impacts of the US midterm elections, some investors have become concerned that AI shares could be in a bubble that is due a correction.