Elon Musk and data center projects face uncertainty after midterm elections

The recent midterm elections and the success of the Democratic party may signal significant shifts for the technology sector. Across various local ballot measures, citizens voted against the expansion of data centers. Furthermore, voters have supported candidates such as Texas governor-elect Gina Hinojosa, who campaigned on pledges to implement restrictions on these facilities.

During an episode of the Equity podcast, hosts Kirsten Korosec, Sean O’Kane, and Anthony Ha discussed the implications of these election results for the industry. O’Kane noted that despite Elon Musk donating half a billion dollars to the Republican Party, he appears to have gained little from the investment. He added that Musk now finds his companies headquartered in a state that has shifted significantly towards the Democrats.

Korosec suggested that while data centers were not the primary driver of the election outcomes, they have emerged as a significant grassroots concern. She attributed this to the methods companies and hyperscalers have used to secure project approvals. Consequently, businesses like OpenAI are now adjusting their policies in response to the changing landscape.

Sean O’Kane stated: “First off, let’s talk about the fact that one of the biggest data center builders was also the largest donor to the Republican Party. Elon Musk seems to have gotten basically nothing out of donating half a billion dollars — maybe even more, by the time we see the final count — and in fact is now sitting there with all of his businesses in a state that has, remarkably, turned about as blue as it could possibly turn for the first time in a very long time, if ever.”

He continued: “But, there were also a bunch of ballot measures up around the country that would have paved the way for data centers to get built faster. Almost all of them got shot down, or voted against. [Actually, many of the ballot measures would have imposed restrictions or moratoriums on data centers, and almost all of those measures passed.] With [Democrats] in power, there is a consensus view, at least in the tech world, that this is going to mean we have a lot of roadblocks ahead for data centers, especially in places like Texas, where [you have] folks like the governor-elect [Gina] Hinojosa, who has spoken pretty openly about this being a campaign promise and something that she wants to focus on once she takes power, now that she’s beaten Greg Abbott.”

Anthony Ha remarked: “I don’t necessarily think that they’re too focused on it, but I understand why it would feel a little bit disproportionate — the data center ballot measures, certainly there were a number of them, but it wasn’t something that was on the ballot everywhere. And in different races, the dynamic might have been a bit different, but there was this undercurrent and sense that it seems to be an issue that reaches across the country, that is bipartisan in a lot of ways, but that the Democrats seem to have been more effective at harnessing that energy. And of course, there’s all kinds of reasons why the Democrats did so well on Tuesday, but it does seem like anti-AI and especially anti-data center sentiment was a big part of it.

That seems like a pretty potent political force.”

Ha added: “The next two years, [and] potentially beyond that, are going to be more difficult for tech companies in general, and hyperscalers, data center companies in particular. I also imagine that they have to be a little bit worried about: Is this going to continue to be an issue, not just with the people who got elected this year, but potentially in 2028 and beyond?”

Kirsten Korosec observed: “Absolutely. I don’t think that the data center issue is what brought everyone to the polls and led to the quote-unquote “blue wave.” However, I will say that data centers have been an increasingly grassroots issue, in part because of how hyperscalers and companies have gone about getting these data centers [approved] — very secretive, oftentimes requiring NDAs of a elected officials or appointed officials, not sharing information about the scale of a project in very environmentally sensitive areas, including in the Southwest, where there’s very much a water scarcity issue. So I think that a lot of folks — Republicans, independents, and Democrats — all saw this as wrong.

They were motivated by it, but I don’t think it was a singular issue.”

Korosec concluded: “Now, here’s the interesting thing. There was a lot of waving of hands about how [AI companies] can’t possibly operate under any other circumstances. And we’re already seeing companies like OpenAI all of a sudden go, “Actually, we can change our policies.” They just released what they call a compute campus policy blueprint. And guess what? They’re not going to require NDAs anymore. They’re going to share their”