Texas Flip Drives 4.2% Drop in CoreWeave

CoreWeave shares fell 4.2% in premarket trading on Wednesday.

The drop followed a Democratic victory in the Texas governor's race. Gina Hinojosa defeated incumbent Greg Abbott. Hinojosa has supported a moratorium on artificial intelligence data centers. Tesla stock also declined, dropping 3.6%. SpaceX fell 3.9%.

Investors reacted to the shift in political control across major data center locations. Democrats won or retained governorships in Georgia, Pennsylvania, and Ohio. Wells Fargo estimates that 27% of planned U.S. data center gigawatts are in Texas. Georgia holds 7% of the total. Ohio and Pennsylvania account for 5% each. The Nasdaq-100 index had already entered correction territory in late October. This happened as concerns grew over slowing spending by hyperscalers and AI firms OpenAI and Anthropic.

Scott Ladner, chief investment officer at Horizon Investments, noted the impact of the Texas result. He said a loss for Abbott would turn fertile ground for construction into barren land. "The one thing that could really end up moving stuff though would be if Abbott were to lose Texas," Ladner said earlier Tuesday. "Because there is a legitimate question about where do you build these data centers?" He added that the loss would create a challenge for the industry.

Ohsung Kwon, chief equity strategist at Wells Fargo, warned that the market reaction would hinge on the Texas race. He called a Democratic win a potential left-tail event for the AI trade. Michael Hartnett of Bank of America predicted a slump of more than 10% in stocks by year-end if Democrats took the Senate and the Texas governorship. The Washington policy team at Optimal Advisory noted that data centers have become a political liability. They wrote that local officials now see an upside to blocking or delaying these projects.

Oracle shares slipped 2.4%. Nebius Group lost 1.5%. The State Street Technology Select Sector SPDR ETF rose 0.7%. Futures on the tech-heavy Nasdaq-100 were flat. The Associated Press projected Hinojosa as the victor over Abbott as results rolled in. Democrats secured a House majority and possibly the Senate. These wins followed heavy losses for Republican candidates backed by Elon Musk.