Elon Musk suffers political setback in 2026 midterm elections

The Democratic Party’s landslide victory in the midterm elections signaled a major rejection of Elon Musk and the artificial intelligence industry. The move comes as a widespread backlash against President Donald Trump and his technology allies has led to increased scrutiny of Democratic Party political influence and debt-driven data center construction.

Mr. Musk, who spent at least $474 million in the midterm elections, spent nearly half of that, $224 million, in Texas alone, only for his favorites, Republican Senate candidate Ken Paxton and Gov. Greg Abbott, to be trounced by a wave of Democrats, according to a CNBC analysis of campaign finance records.

This defeat shook the market overnight, space x and tesla Both have long thrived under Abbott’s business friendliness. Meanwhile, tech stocks generally came under pressure as Democrats secured control of Congress.

Across the country, voters resisted the influence of billionaires and the growing power of technology companies, elected people critical of the AI ​​industry, and approved restrictions on data centers that facilitate the industry’s expansion.

“We have to get big money out of politics so that billionaires and trillionaires can’t buy elections,” Democratic Sen.-elect James Talarico said in his victory speech, without mentioning Musk by name. “We have to dismantle this economic system that only benefits the top 1%.”

JC Linzenich, a visiting senior fellow at the German Marshall Fund, pointed to Musk’s big spending in Texas on CNBC’s “Squawk Box Europe” on Wednesday, saying the results were “a clear rejection of the aspects of Elon Musk that have entered Trump’s orbit.”

Texas has grown to be home to much of the Musk empire. tesla We operate the largest automobile factory in the United States in the suburbs of Austin. space x is launching rockets from its Starbase complex in south Texas, and Musk is making additional investments in AI and semiconductor manufacturing.

These operations are highly dependent on state decisions regarding electricity, water, environmental permits, infrastructure, and tax incentives. Incoming Democratic Gov. Gina Hinojosa, who campaigned against generous corporate subsidies, and Mr. Musk himself will have significant influence over these decisions.

Hinojosa is calling for a moratorium on new data centers, an end to industry tax breaks, and a requirement for developers to pay full electricity costs. In her victory speech Tuesday, she vowed to take power away from “the powerful people who are so used to running this state.”

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

Musk’s America PAC spent nearly $87 million on 44 federal horse races across the country, according to a CNBC analysis of FEC filings. As of Wednesday morning, the party-backed Republicans had lost 29 races and won just three, with 12 parties yet to convene. More than $80 million, or 93% of the spending, went to races that Republicans lost.

The outcome leaves Musk with fewer allies in the Democratic-led Congress who can investigate his federal contracts, Trump’s past leadership of the Department of Government Efficiency and his companies’ ties to Washington.

Congressional oversight could delay SpaceX’s lucrative and fast-growing government contracts, but Trump’s continued control of the executive branch and veto power limits Democrats’ ability to overturn policies that benefit Musk’s defense technology business.

This defeat is not the first time that Mr. Musk’s political spending has not produced the desired results.

America PAC has backed eight unsuccessful 2024 congressional candidates, and Musk spent more than $20 million last year to elect a conservative in Wisconsin. Musk pledged last year to “drastically reduce” his political spending, but ended up becoming the largest known donor for the 2026 midterm elections.

Ron Baron, a longtime Tesla investor, warned in March 2025 that Musk’s political activities risk alienating customers, telling CNBC, “I don’t think it’s a great thing to alienate half the population.”

Others praised Mr. Musk’s close relationship with Mr. Trump and his influence on everything from regulation to the Pentagon’s tech spending.

Musk wasn’t the only tech guy to spend big.

OpenAI President Greg Brockman and his wife, Anna, donated $25 million to Leading the Future, a political campaign aimed at shaping AI regulation, according to FEC filings. Venture capital firm Andreessen Horowitz contributed another $50 million.

While the industry has achieved some victories in the Democratic congressional primary, including defeating New York state Rep. Alex Boas, who advocated stronger AI safeguards, gaining support from local communities has proven much more difficult.

In Ohio, Democrat Sherrod Brown defeated Republican Sen. Jon Husted, who attacked his support for data centers. Democrats spent nearly $28 million on ads criticizing data centers, according to AdImpact.

In South Carolina, Democrat Annie Andrews defeated Republican Sen. Darin Graham, despite late advertising by Building the Future, a new data center industry super PAC that made Graham its first endorsed candidate. The group secured $1.5 million in advertising in support of Mr Graham, while Mr Andrews campaigned for a two-year moratorium on new data centres.

According to AdImpact, campaigns and outside groups nationwide spent $173 million on advertising about data centers during the 2026 general election, and the ads were almost entirely negative. Democratic advertisers accounted for $140 million of this spending. Voters also considered 41 local data center measures on Tuesday, with at least 10 communities approving bans or restrictions.

The financial risks are very high.

JPMorgan Asset Management estimates that building AI infrastructure could cost about $5 trillion by 2030, including about $2 trillion raised through investment-grade bond markets.

A project cannot generate the expected revenue until it is fully operational. Allowing delays may delay completion or revenue, and rising utility and borrowing costs may increase project costs and make it difficult to achieve expected revenue.