AI Regulation Was on the Ballot In These States. Here Are The Elon Musk Stocks That Could Be Impacted.

The Democrats rolled to sweeping victories in the midterm elections on Nov. 3, reclaiming control of both the U.S. House of Representatives and the U.S. Senate.

While not all results are final, the Democrats appear to control 258 seats in the House, with the Republicans controlling 177. Meanwhile, the Dems now appear to have 54 Senate seats, compared to the Republicans' 44, with two races still undecided.

The results show a clear repudiation of President Donald Trump and the Republicans' agenda over the past two years. While the Iran war, high oil prices, and overall affordability were likely at the top of voters' agenda, make no mistake: artificial intelligence was also on the ballot in many different elections.

Here are the Elon Musk stocks that could be impacted.

Image source: The White House.

Data centers and AI safety laws

Many stakeholders have been concerned about the threats posed by AI, including how many jobs it will replace, data and security breaches, and its impact on humanity as a whole.

Musk runs both Space Exploration Technologies Corp (NASDAQ:SPCX) and Tesla, two companies deeply involved with AI.

AI became an issue in many key Congressional races and state elections in Texas, Pennsylvania, Georgia, Ohio, and Virginia, among others. Some candidates focused more on the impact of data centers, while others promised stricter AI regulation.

Generally speaking, Democratic candidates leaned toward caution and favored regulation or stricter requirements for data centers. Some candidates sought to outright ban data centers for at least a period.

SpaceX has data centers in Tennessee and Mississippi, but other states of interest for both SpaceX and Tesla include Texas and Georgia, among others.

Musk was a heavy spender in the midterm election cycle, allocating at least $474 million. Nowhere did Musk spend more than in Texas, a historically Red state the Democrats just swept.

James Talarico became the first Democrat to win a U.S. Senate seat in Texas since 1988, while Gina Hinojosa became the first Democratic governor of Texas since 1995.

Musk and his super PAC reportedly spent $224 million on the Texas races. Hinojosa defeated the incumbent Gov. Greg Abbott, who Musk reportedly had close ties to. In fact, Tesla's policy chief used to be Abbott's deputy director for legislative affairs.

Tesla is currently expanding its Cortex AI training supercluster in Austin, Texas, while SpaceX has reportedly been looking to build another data center campus in Texas with an additional 1 gigawatt (GW) of compute capacity.

SpaceX and Tesla will face higher barriers on data centers

Heading into midterms, there was already a lot of scrutiny of AI, particularly regarding data centers, which can raise electricity costs and consume critical resources.

Many citizens, worried about losing their jobs, are also not particularly inclined to endorse AI right now, while Democrats seemingly have little to gain by cozying up to Musk, given the party's current direction.

As of 10:45 a.m. ET, the major market indexes were soaring higher, yet SpaceX and Tesla traded roughly 3% and 2.2% lower, respectively.

Hinojosa's win is a clear blow to Musk and both of his companies. Not only did Musk have much closer ties to Abbott, but Hinojosa has talked about imposing measures, such as an immediate moratorium on data center development.

On SpaceX's recent earnings call, Musk told analysts that the company expects to build and bring online at least an additional 10 GW of AI compute capacity in 2027 via data centers. That task likely just got a lot harder.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends Space Exploration Technologies. The Motley Fool has a disclosure policy.