The Democrats’ historic victory in this week’s midterm elections could also have a dramatic effect on the tech industry. In dozens of local ballot measures, voters rejected data centers. And even when they weren’t directly voting on the issue, they were electing politicians (like newly elected Texas governor Gina Hinojosa) who campaigned on a promise to restrict data centers. On the latest episode of TechCrunch’s Equity podcast, Kirsten Korosec, Sean O’Kane and I discuss what the midterm elections mean for the tech industry. Sean began by noting that Elon Musk “seems to have basically nothing to do with donating $500 million” to Republicans, while his companies are now based “in a state that, shockingly, has gone as blue as it could possibly get.” And Kirsten said that while data centers were probably not the main cause of the “blue wave,” they have become “an increasingly popular issue, in part because of the way hyperscalers and enterprises have gotten” their projects approved. And now, “we’re already seeing companies like OpenAI suddenly saying, ‘Actually, we can change our policies.’” Read on for a preview of our conversation, edited for length and clarity. Sean O’Kane: First, let’s talk about the fact that one of the largest data center builders was also the largest donor to the Republican Party. Elon Musk appears to have gotten basically nothing out of the $500 million donation (maybe even more, when we see the final tally), and in fact is now sitting there with all his businesses in a state that, surprisingly, has turned as blue as it could be for the first time in a long time, if ever. I think that’s the biggest thing hanging over much of this discussion. But there were also plenty of ballot measures across the country that would have paved the way for data centers to be built faster. Almost all of them were shot down or voted down. [Actually, many of the ballot measures would have imposed restrictions or moratoriums on data centers, and almost all of those measures passed.]
With [Democrats] There is a consensus in power, at least in the tech world, that this will mean we will have many obstacles ahead for data centers, especially in places like Texas, where [you have] people like the governor-elect [Gina] Hinojosa, who has spoken quite openly about this being a campaign promise and something he wants to focus on once he takes office, now that he has defeated Greg Abbott. It’s what I think the tech world is perhaps too focused on. I’m curious to know what you guys think about that. Anthony Ha: I don’t necessarily think they’re too focused on it, but I understand why it would feel a little disproportionate – the data center ballot measures, certainly there were several, but it wasn’t something that was on the ballot everywhere. And in different races, the dynamics might have been a little different, but there was an undercurrent and a sense that this seems to be a nationwide issue, that it’s bipartisan in many ways, but that Democrats seem to have been more effective in harnessing that energy. And of course, there are all kinds of reasons why Democrats did so well on Tuesday, but it seems like anti-AI and especially anti-data center sentiment was a big part of it. It seems like a pretty powerful political force. The next two years, [and] Potentially beyond that, they will be more difficult for technology companies in general, and for hyperscalers, and data center companies in particular. I also imagine they have to be a little worried: will this still be an issue, not just for the people who were elected this year, but potentially in 2028 and beyond? Kirsten Korosec: Absolutely. I don’t think the data center issue is what brought everyone to the polls and led to the quote-unquote “blue wave.” However, I will say that data centers have been an increasingly popular issue, in part because of how hyperscalers and enterprises have managed to get their hands on these data centers. [approved] — very secretive, often demanding confidentiality agreements from elected or appointed officials, without sharing information about the scale of a project in highly environmentally sensitive areas, including the southwest, where there is a major water shortage problem. So I think a lot of people (Republicans, independents and Democrats) saw this as the wrong thing to do. They were motivated by it, but I don’t think it was a singular issue. Now, here’s the interesting thing. There was a lot of hand waving about how [AI companies] It cannot possibly work under any other circumstances. And we’re already seeing companies like OpenAI suddenly saying, “Actually, we can change our policies.” They just released what they call a policy plan for the computing campus. And guess what? They will no longer require confidentiality agreements. They will share their plans and supposedly operate in less secrecy. I think what this shows is that when regulatory certainty is created in the market, or at least signs of moving in that direction, corporations will respond. If you don’t, they won’t necessarily do what we expect them to do. Anthony: One thing I want to emphasize is that they call it that. [their] “calculate campus politics.” And part of what that is doing, beyond exposing these policy changes, is also an attempt to rebrand data centers, because they have become a very toxic phrase. So they’re no longer data centers, they’re computing campuses, and I’m curious if any of you think that will be necessary. Sean: I mean, this is ridiculous. Come on. It’s not going to change anything. It will cause them more effort. For a company that likes to say it’s no longer focused on side missions, OpenAI still loves to go in different directions. And this is just the last kind of thing where it’s like: Why are you spending time on this? It doesn’t really seem like it’s going to move the needle. Kirsten: I have a great idea for OpenAI. Because in order to make threatening things look cute, they should 100% create a computer campus avatar, [a] something cheesy, and then just present that instead of a data center that consumes energy, energy and water. Anthony: And if these are just beautiful computing campuses, they should build their own offices there or work next door, and see how it works for them. Another thing I wonder about is to what extent the elections are perhaps the second part of a double whammy. [We’ve just seen] a big shift in the way Wall Street is reacting to a lot of these hyperscalers and AI companies and this sense that [investors] They’re not excited about spending all this money building new data centers, spending all this money on computing. Therefore, there is a financial incentive not to build all these data centers. I’m very curious to see how that will play out. [From a regulatory standpoint,] It will probably be more difficult to build data centers. Wall Street probably won’t reward you for building data centers. But at the same time, to reach the scale they want to achieve, they will probably need to build data centers somewhere. When you buy through links in our articles, we may earn a small commission. This does not affect our editorial independence.