Democrats’ victory in both chambers of Congress has introduced fresh uncertainty for the U.S. AI infrastructure industry, with investors concerned that tighter regulations could restrict the expansion of data centers. As pressure builds on the sector, Elon Musk and investor Chamath Palihapitiya are drawing attention to space-based infrastructure as a potential alternative.

The concerns gained momentum after Democrat Gina Hinojosa was projected to win in Texas, according to CNBC. Hinojosa has supported a moratorium on AI data center construction, raising questions about future development in a state that represents approximately 27% of planned U.S. data center power capacity, based on Wells Fargo estimates.

The political developments weighed on AI infrastructure stocks during early trading. CoreWeave declined around 3.3%, Applied Digital dropped 3%, and IREN fell approximately 4.3% before Wednesday’s market opening.

The sector has already experienced a significant correction, with CoreWeave (CRWV), Cipher Digital (CIFR), IREN (IREN) and Nebius (NBIS) losing approximately 50% to 60% from their respective highs. Concerns over rising borrowing costs, substantial infrastructure spending and uncertain future profitability have continued to undermine investor confidence.

However, broader financial markets showed signs of stabilization. Invesco QQQ technology futures gained 0.3% in premarket trading, while Bitcoin climbed above $78,000, posting gains of more than 1% over the previous 24 hours.

Musk Sees Potential in Space Data Centers as AI Industry Faces Headwinds

As regulatory concerns mount around conventional data center construction, Elon Musk and Chamath Palihapitiya have highlighted the growing investment opportunities within the space economy.

The possibility of stricter development rules could create additional obstacles for an AI infrastructure industry that expanded under Republican policies focused on deregulation and business growth.

Both Musk and Palihapitiya have previously supported Republicans and President Donald Trump. Following the latest election results, Musk suggested that shifting data center infrastructure into space could become an increasingly appealing proposition.

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

Palihapitiya also outlined the sector’s growing investment potential in his latest research. Private investment in space hardware reportedly reached approximately $17 billion in 2025, compared with just $500 million in 2012, highlighting the industry’s rapid expansion.

Nevertheless, the market weakness extended to SpaceX (SPCX). The company, which completed its IPO in June, saw its shares decline approximately 4% during Wednesday’s premarket trading.