Democrats take Texas governor's office, Senate seat and state House despite Musk's $225m push

The outcome ends a Republican hold on the governor's office that began in 1995 and gives Democrats their first U.S. Senate win in Texas since 1988. Musk, whose companies Tesla and SpaceX are headquartered in Texas, gave more than $445 million to Republican candidates, PACs and outside groups this cycle, making him the top donor of the midterms, according to OpenSecrets, with other tallies running higher.

Tesla's Austin headquarters and Gigafactory, SpaceX's Starbase launch site and X (now part of SpaceX after the February merger with xAI) all operate in the state, along with Terafab, the $16.8 billion chip plant under construction in Grimes County. While Tesla is unlikely to see immediate manufacturing disruptions, it could face more scrutiny of its Autopilot and Full Self-Driving technology and its planned Cybercab robotaxi rollout, especially with Democrats also winning both chambers of Congress.

Hinojosa has put the fight over data center development at the center of her approach. "I will issue a moratorium — a ban — on all data center approvals," she said in an Oct. 22 video, pledging to keep it in place until the Legislature passes new protections, the Texas Tribune reported. Abbott himself paused new data center permits in September pending a grid audit. The open question is how long and how broadly a Hinojosa freeze would apply.

Terafab's first phase represents a capital investment of more than $16.8 billion and is expected to create 3,000 jobs, according to Abbott's office, and the full project could be built in up to four phases at a total cost of $55 billion to $119 billion, Manufacturing Dive reported. The state has extended a $30 million Texas Enterprise Fund grant, and the plant qualifies for the Jobs, Energy, Technology, and Innovation (JETI) program, which reduces school property taxes for large projects. The election does not automatically cancel those commitments, but closer scrutiny of incentives and environmental requirements could raise costs or slow later phases.

Before winning, Hinojosa challenged Abbott's relationship with Musk in court. On Oct. 19, the first day of early voting, she sued for access to unredacted communications between Abbott's office and Musk and his companies. Her lawsuit says the governor's office described some of the records as "intimate and embarrassing." Hinojosa pointed to a $1.66 billion JETI tax break tied to Terafab, more than $54 million in state grants to SpaceX, and Abbott's push for the state broadband office to award Starlink $110 million upfront from federal funds, a move that triggered an audit of the office. Abbott's office called the suit "a baseless stunt." State District Judge Catherine Mauzy ordered Abbott's office on Oct. 26 to let Hinojosa inspect the records, and the 15th Court of Appeals stayed that order the next day. Bloomberg Government separately reported that Mauzy had donated $500 to Hinojosa's campaign in June.

Shares of Tesla and SpaceX both fell the day after the election while the broader market rose, closing down 3.3 percent and 3.8 percent on Nov. 4, though the timing does not prove investors were reacting to Texas. Wells Fargo's chief equity strategist, Ohsung Kwon, had warned that a Democratic win in the governor's race could be a "left-tail event" for the AI trade, CNBC reported. Musk is also weighing a merger of Tesla and SpaceX, a deal that Democratic majorities in Congress could now scrutinize.

Hinojosa takes office in January, the same month lawmakers return to Austin, and will control state appointments, the veto and the governor's office that administers the Texas Enterprise Fund. Republicans kept their 19-12 majority in the Texas Senate, but Democrat Vikki Goodwin's win in the lieutenant governor's race gives the party the chamber's presiding officer. The next tests are how far her data center freeze reaches, whether Terafab's JETI agreements draw legislative review, and whether the fight over Abbott's Musk records outlasts his administration.