Tech industry explores space for data centers after US election results

Why tech leaders are looking beyond Earth

Elon Musk and other tech industry figures are pushing for data centers in space following Democratic victories in the US midterm elections, particularly in Texas. The shift comes as concerns grow about potential regulatory changes affecting terrestrial data centers in key states. Musk, whose SpaceX lost nearly 10% in share value after the election results, posted on X that "data centers in space [are] looking pretty appealing right now." Other companies, including Google, Blue Origin, and startups like Starcloud, are already exploring orbital or underwater alternatives.

Texas politics and the limits of regulatory change

The election results delivered a split legislature in Texas—Democrats gained control of the House, while Republicans retained the Senate. This divide may limit immediate regulatory changes, but it has not eased industry anxieties. Texas governor-elect Gina Hinojosa, a Democrat, campaigned on a moratorium for new data center construction, amplifying concerns about stricter oversight.

Adrian Shelley of Public Citizen’s Texas office told WIRED that a Democratic governor could still act quickly through executive orders or by replacing politically appointed officials at agencies like the Texas Commission on Environmental Quality. Nearly half of Texas’s data centers are in unincorporated areas, where city-level zoning laws do not apply, but counties lack the authority to regulate them under the state’s Dillon’s Rule.

Robert Paterson, a professor at the University of Texas at Austin, suggested counties could gain limited zoning authority over data centers, though such changes would require legislative action.

SpaceX’s conditional home buyouts near its AI data center

SpaceX is offering to purchase 418 homes in Colonial Hills, Southaven, near its Colossus II AI data center, but only if homeowners agree to withdraw from a noise pollution lawsuit. Residents allege that gas turbines powering the facility have caused persistent sleep disruption and other health issues. SpaceX disputes the claims, stating it has taken steps to reduce noise, including sound barriers and lowering power output.

The company plans to decommission the disputed turbines within a year as a new 1.2-gigawatt power station comes online. Some residents have accepted the buyout offers, while others continue to oppose SpaceX’s operations. Mayor Darren Musselwhite denied suggestions that the purchases would turn Colonial Hills into a company-dominated neighborhood, framing the deals as a way to support both employees and residents seeking relief.

Markets slide on regulatory fears

The stock market reacted sharply to the election results, with major tech and AI stocks experiencing steep declines. SpaceX shares fell over 9%, while Tesla, AMD, Micron, Intel, and Nvidia saw drops ranging from 7% to 17%. The Nasdaq Composite and S&P 500 indices fell by over 5% and 3.8%, respectively, as investors absorbed the implications of Democratic wins in data center-heavy states.

Susannah Streeter of Wealth Club described the sell-off as "fresh panic over the AI trade," citing fears that regulatory scrutiny could slow data center construction and reduce returns on AI infrastructure investments. OpenAI’s Greg Brockman and Meta’s Dina Powell McCormick acknowledged the industry’s need to better communicate the benefits of AI to communities.

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