What a blue Texas means for Elon Musk’s future

Elon Musk left California for Texas, hoping to put Democratic regulators behind him. But after Tuesday’s election, the Tesla CEO may find that the political climate he moved to escape is catching up with him in the state he now calls home.

Democrats won every statewide executive office in Texas, flipped the state House for the first time in more than two decades and elected Gina Hinojosa governor, the first Democrat to win the office since Ann Richards in 1990. State Representative James Talarico beat Republican Ken Paxton in the U.S. Senate race by more than 12 points.

Musk, the richest man in the world and largest Republican donor this cycle, spent heavily to stop it. He gave nearly half a billion dollars to Republican groups nationally, with at least $168 million going to ads backing Paxton. Governor Greg Abbott’s campaign alone got $5.5 million from him.

Hinojosa now inherits the office that oversaw more than $1.6 billion in tax incentives for Musk’s companies, and she has promised to freeze data center approvals.

“I want to say something to the powerful people who have gotten very comfortable running this state,” she said in a statement declaring her victory. “The voters have delivered a mandate for change, and it is change they will get.”

SpaceX shares closed down 3.8 percent on Wednesday and Tesla fell 3.3 percent, even with the broader market up.

Newsweek contacted Hinojosa’s campaign and Musk through Tesla for comment Wednesday.

What Musk Has Gained From Texas

Musk began moving operations in 2020 after clashing with California over pandemic restrictions at Tesla’s factory there. In 2024, he shifted SpaceX and X to Texas, citing a gender identity law signed by Democratic Governor Gavin Newsom.

His companies now employ more than 20,000 people in the state. SpaceX builds and launches its Starship rocket at Starbase, a company town incorporated as a city last year. It is also starting work on Terafab, a Grimes County chip plant that SpaceX has said could eventually cost $119 billion.

Abbott’s office oversaw tens of millions of dollars in grants as well as the tax incentives, most of them for Terafab, the Houston Chronicle reported. Hinojosa’s lawsuit against Abbott counted more than $54 million in state grants to SpaceX.

After a Delaware judge voided Musk’s Tesla pay package, he reincorporated Tesla and SpaceX in Texas, and lawmakers followed in 2025 with a law letting companies require shareholders to own up to 3 percent of their stock before bringing certain suits against directors. The investor who sued in Delaware held nine shares.

The Legislature also gave Starbase officials the authority to close Boca Chica Beach for launches, a power previously held by Cameron County.

Data Centers Are the First Test

Hinojosa takes office on January 19, but she has already given Musk and other tech executives a preview of her plans. In an October campaign video, she pledged to “issue a moratorium” and impose “a ban” on all data center approvals “until laws can be passed by the Legislature to protect Texans.”

Her proposal goes further than the pause Abbott ordered this fall, which froze environmental permits and grid connections while an audit expected to wrap up this year is underway.

Wells Fargo estimates that 27 percent of planned U.S. data center capacity is in Texas.

Musk’s AI business runs mainly on two data centers near Memphis, outside her reach. But Reuters reported that SpaceX aims to scale from 1.7 gigawatts in September to 13 gigawatts next year, and that research firm SemiAnalysis has identified new facilities at Starbase.

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

Grimes County leaders told KBTX in September that Terafab is classified as a chip plant and that Abbott’s pause had not touched it, which could put the project outside a moratorium too. The reach of any Hinojosa order would depend on how it defines a data center.

Her order would also run through agencies filled with Abbott appointees. Texas Commission on Environmental Quality commissioners serve staggered six-year terms, and removing an appointee requires Senate consent. Abbott widened the use of executive orders and emergency powers, however, and veteran lobbyist Bill Miller told the Tribune that successors rarely give such authority back.

Taxes and Incentives

Hinojosa has said she would push the Legislature to “end corporate welfare” and redirect the money toward lowering property taxes. Texas has no personal income tax, and its constitution bars one, so the fight centers on corporate breaks.

Abbott also promised to go after the sales tax exemption for data centers, and the Houston Chronicle reported support for stripping it among a broad group of lawmakers.

More money sits in JETI, the state program that cuts school property taxes for big projects. Terafab would pay school operating taxes on half its value for 10 years per phase, KBTX reported.

Those deals have already cleared the approval process, and it is unclear whether Hinojosa could reopen them. The American Prospect reported that she promised to review them.

Every JETI agreement needs the governor’s approval along with the school district’s, so she would have a say over new ones. Tesla’s proposed $10.1 billion solar plant in Fort Bend County cleared local votes this fall, and reports in late October said it still needed state sign-off. Tesla has said a site outside Texas remains under consideration.

Comptroller-elect Sarah Eckhardt, a Democrat, will review new JETI applications and collect job data from companies that hold agreements. The governor’s office also controls the Texas Enterprise Fund, which gave SpaceX $30 million for Terafab.

An Attorney General Who Has Named Him

State Senator Nathan Johnson, who will succeed Ken Paxton as Texas attorney general, warned Musk in an interview with NBC News on Wednesday.

“I don’t have a hit list, but I show no deference to a guy who has gone to great lengths to control the government and do enormous damage globally,” Johnson said.

So far he has focused on broadband. Starlink was set to receive about $110 million in federal funds administered by the state. The state’s broadband director told lawmakers that rule changes came at the urging of Abbott’s office, and Republican leaders ordered an audit. Payments were paused in August.

He said in July that 99 percent of grant funds went to SpaceX. Broadband Breakfast called that claim false, reporting that the company received less than one-tenth of the state’s $1.2 billion, covering about 27 percent of locations.

“I am not declaring that corruption was at work in this instance. I am saying that it sure looks like it,” Johnson said at the time.

Hinojosa has a parallel fight over 1,374 pages of communications between Abbott’s office and Musk’s companies. A Travis County judge sided with her in October, but an appeals court put the order on hold. Abbott’s office called the suit a stunt. She takes over that office in January.

Starbase and Public Land

Hinojosa grew up in the Rio Grande Valley and spent summers at Boca Chica Beach, next to Starbase. In October, Texas Monthly reported that state park commissioners had been discussing selling Boca Chica State Park, with SpaceX as the potential buyer. The agency denied a sale was on its November agenda, and Abbott said it would not happen soon.

“Like so many families in the Valley, I spent my summers at Boca Chica Beach,” Hinojosa said in a statement released by her campaign. “Now, after 12 years of selling out Texas to his corporate donors and making working people foot the bill, Greg Abbott is handing over our land to the world’s only trillionaire. Let me be clear: Texas is not for sale.”

The Parks and Wildlife Commission has nine governor-appointed members with staggered terms, so she can reshape it over time.

On beach closures, the courts have already gone SpaceX’s way. In June, the Texas Supreme Court ruled unanimously that private groups cannot sue to enforce the state’s open beaches guarantee, leaving enforcement to government actors. Attorney Marisa Perales, who represents groups opposed to SpaceX, told the Chronicle that new leadership at the attorney general’s office and the General Land Office could help protect access.

Democrats now hold both offices, with Benjamin Flores defeating Republican Land Commissioner Dawn Buckingham. Rewriting the closure laws would still require the Legislature.

What Comes Next

Democrats also won both chambers of Congress. California Representative Robert Garcia, the next House Oversight Committee chair, has scrutinized Musk, and Democrats could slow a potential Tesla-SpaceX merger.

Musk has threatened on X to retaliate over congressional investigations. Hinojosa planned to announce next steps at a news conference on Thursday, and lawmakers can begin filing bills next week.

Despite Democrats’ gains, Republicans retained control of the state Senate, 19-12, according to Associated Press projections, giving them the power to block legislation. The result sets up Texas’ first divided government in nearly three decades.

“Texas stands as long as the Texas Senate Republican caucus holds the line,” Republican state Senator Charles Schwertner wrote on X. Lieutenant Governor-elect Vikki Goodwin, a Democrat, will preside over the chamber, but Republicans are weighing rule changes to curb her powers.

Hinojosa can still veto bills, call special sessions, issue executive orders and fill boards and commissions. Democrats were on track for about 83 House seats, which would give her allies control of committees and hearings in that chamber.

The challenge for Democrats is turning their criticism of billionaires into a broader economic message without alienating voters or businesses, according to some experts.

“It’s fine for Democrats to take on the billionaire class, but don’t expect it to win a whole lot of new votes,” Jim Kessler, executive vice president for policy at the centrist think tank Third Way, told Newsweek. “But just taking on the billionaires without handling people’s daily concerns is not enough.”

But some analysts warn that Democrats could face political blowback if high-profile companies begin leaving states under Democratic leadership, taking jobs with them. That could become one of the party’s biggest vulnerabilities heading into the 2028 election.

Party leaders “will have to walk a fine line between policing business practices and continuing political funding from those with deep pockets,” Brandon Rottinghaus, a political science professor at the University of Houston, previously told Newsweek.

Contact Newsweek editors on this story: Jason Lemon and Emma Lee-Sang