Elon Musk Pitches Space-Based Data Centers as Democratic Sweep Weighs on AI Stocks

The AI infrastructure sector is facing another setback after Democrats secured control of both chambers of Congress on Tuesday, raising concerns that stricter regulations could slow the construction of data centers across the United States. Meanwhile, Elon Musk and investor Chamath Palihapitiya are drawing attention to space-based investment opportunities as the industry searches for alternatives.

Democrat Gina Hinojosa’s projected victory in Texas has added to concerns about potential restrictions on data center development, CNBC reported. Hinojosa supports a temporary halt on AI data center construction, while Texas represents approximately 27% of planned U.S. data center power capacity, according to estimates from Wells Fargo.

Investor concerns were visible in early market trading. Shares of AI infrastructure companies CoreWeave and Applied Digital declined approximately 3.3% and 3%, respectively, while IREN fell 4.3% ahead of Wednesday’s market opening.

Major players in the sector, including CoreWeave (CRWV), Cipher Digital (CIFR), IREN (IREN) and Nebius (NBIS), have already lost roughly 50% to 60% from their respective highs. Investors are increasingly questioning the industry’s heavy capital expenditures, borrowing requirements and ability to generate sustainable returns.

Despite the pressure on AI-related stocks, broader financial markets showed signs of recovery. Invesco QQQ technology futures gained 0.3% before the opening bell, while Bitcoin climbed above $78,000, recording a gain of more than 1% over the previous 24 hours.

Space Economy Gains Attention as AI Infrastructure Faces Pressure

Elon Musk and investor Chamath Palihapitiya turned to X to highlight opportunities in the space industry as Democratic election victories raised fresh questions about the future of U.S. AI infrastructure.

Potential restrictions on data center construction could create additional challenges for an industry that expanded rapidly under Republican policies emphasizing deregulation, investment and economic growth.

Both Musk and Palihapitiya have supported Republicans and President Donald Trump in recent years.

Following the Republican election losses, Musk suggested that building data centers beyond Earth could become increasingly attractive.

“Data centers in space looking pretty appealing right now,” Musk wrote on X.

Palihapitiya presented a broader investment outlook for the space economy in his latest research. According to his figures, private investment in space hardware reached approximately $17 billion in 2025, compared with just $500 million in 2012, highlighting the sector’s significant expansion.

However, SpaceX (SPCX), which completed its initial public offering in June, was not immune to the broader market weakness. Its shares declined approximately 4% during Wednesday’s premarket trading.