Elon Musk directed at least $225 million of his midterm spending toward Texas, according to OpenSecrets data reported by NPR. Yet Texas — home to the headquarters of Tesla and SpaceX — handed Democrats the governor's office, a U.S. Senate seat, and control of the state House in Tuesday's elections anyway.

Democrat Gina Hinojosa unseated three-term Gov. Greg Abbott, becoming the state's first Latina governor and ending a Republican hold on the office that began in 1995. James Talarico defeated Republican Ken Paxton, marking the first Democratic U.S. Senate win in Texas since 1988. Democrats also captured the Texas House for the first time since Republicans took it in 2002.

For Musk, the outcome replaces a governor who championed his Texas expansion with one who sued to see Abbott's communications with him and has pledged to freeze data center approvals. Tesla, SpaceX, and Terafab — the $16.8 billion chip plant they are building in Grimes County — all depend on state cooperation for their next phase in Texas.

Musk 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, though other tallies run higher. A Fortune analysis found that since May 2025, he has given more to federal political groups than George Soros has personally given in his lifetime.

What a Democratic Texas means for Musk's companies

Texas hosts Tesla's Austin headquarters and Gigafactory, SpaceX's Starbase launch site, and X, which became part of SpaceX when SpaceX merged with xAI in February. Tesla, a Fortune 500 company, is unlikely to see immediate manufacturing disruptions.

The automaker could, however, face greater scrutiny of its Autopilot and Full Self-Driving technology and its planned Cybercab robotaxi rollout — particularly with Democrats also winning both chambers of Congress. Democratic lawmakers could also push for a closer look at Musk's companies and their government relationships.

SpaceX's Texas expansion and its AI infrastructure ambitions could likewise meet tougher environmental reviews and more contentious debates over electricity, water, and data center development. Hinojosa has made that fight central. "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, as the Texas Tribune reported.

Abbott himself paused new data center permits in September pending a grid audit. Grid oversight is largely a state affair in Texas, which operates its own power grid mostly isolated from the rest of the country. The open question for Musk is how long, and how broadly, a Hinojosa freeze would apply.

Why Terafab's incentives face new questions

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. The full project could be built in up to four phases at a total cost of $55 billion to $119 billion, as reported by Manufacturing Dive.

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. State lawmakers created JETI in 2023 to attract large capital investments to Texas. The election does not automatically cancel those commitments, but closer scrutiny of incentives and environmental requirements could raise costs or slow later phases.

Terafab is a chip plant rather than a conventional data center, but its energy and infrastructure demands could still draw attention from officials concerned about industrial expansion. Musk has said the facility will produce AI chips at scale.

The lawsuit that previews Hinojosa's approach

Hinojosa challenged Abbott's relationship with Musk before she won. 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 those records as "intimate and embarrassing."

She 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.

Starting in January, Hinojosa 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. In Texas, the lieutenant governor appoints Senate committees and shapes which bills reach the floor, giving the presiding officer broad influence over the legislative agenda.

What to watch next

Shares of Musk's two public companies fell the day after the election while the broader market rose. Tesla closed down 3.3% and SpaceX down 3.8% on Nov. 4, according to Yahoo Finance. The timing does not prove investors were reacting to Texas, but Wells Fargo 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. Fortune has reported on what the merger talks reveal about his power.

Hinojosa takes office in January, the same month lawmakers return to Austin. 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.

This story was originally featured on Fortune.com.