SpaceX Falls Over 9%, Down Nearly 30% From October High; Musk Reposts Investor Analysis on Texas Proposed Pause on New Data Center Approvals

On November 5, Musk replied "Interesting" to a post on X by investor Gavin Baker regarding Texas data center approval policies.

[Source: X]

In his post, Baker stated that Texas Governor-elect Gina Hinojosa indicated that already-permitted data centers could proceed to complete construction. Based on this, he judged that existing projects are expected to support Texas data center construction through 2027 or even 2028, while newly approved projects in the future could face stricter requirements.

However, this represents Baker's interpretation of Hinojosa's remarks rather than an officially enacted policy, nor does it imply that all approved projects will be exempt from other approval requirements.

During her campaign, Hinojosa pledged to pause approvals for new data centers until the state legislature passes laws protecting residents' interests. Her proposed policy directions include protecting community water resources, preventing data centers from driving up residential electricity bills, eliminating related tax subsidies, and requiring companies to hire union workers.

Hinojosa has won the Texas gubernatorial election and will take office on January 19, 2027. Her proposed policies will still need to be advanced and implemented through the state government and the state legislature.

Meanwhile, incumbent Governor Greg Abbott previously directed the Texas Commission on Environmental Quality to pause data center-related permit approvals and asked regulators to review projects applying to connect to the power grid. The reviews encompass data centers' electricity demand, water usage, tax incentives, and impact on surrounding communities. The Electric Reliability Council of Texas is expected to submit a review report on the first batch of projects in December 2026.

The measures could prolong the approval timeline for SpaceX's new data centers in Texas and delay the deployment of additional computing capacity, thereby affecting the expansion of its compute-leasing business. However, there is currently no evidence that SpaceX's specific projects have been directly affected by the approval pause.

Texas is a major market for data center construction in the U.S. and home to SpaceX's headquarters. As the company ramps up investments in its AI computing business, leasing computing power to other enterprises has become a key source of revenue.

According to Reuters, more than half of SpaceX's third-quarter sales revenue came from its compute leasing business. Meanwhile, the company is planning to expand its data center footprint in Texas. If local authorities tighten approvals for new projects, it could delay SpaceX's construction of new data centers and deployment of computing capacity, impacting the expansion pace of its AI computing business.

If the approval of new data centers faces an extended pause, construction of some planned projects could be delayed, in turn affecting future data center capacity growth in Texas.

For SpaceX, this means that the rollout of new computing capacity and related revenue growth could be affected. However, the policy's impact will primarily depend on the scope of approvals for new projects and the duration of the pause, so it cannot be concluded that the company's existing computing business will face a direct hit.

In addition, pausing approvals for new projects does not mean that all approved data centers will halt work. Projects that have already secured permits or are under construction are more likely to move forward, though their specific progress will still depend on regulatory requirements such as environmental permits and grid interconnection.

On November 5, the AI and semiconductor sectors suffered a heavy sell-off. Nvidia (NVDA) fell 9.26%, AMD (AMD) dropped 17.26%, Micron (MU) declined 17.46%, and SanDisk (SNDK) plunged 22.26%. Data center power equipment supplier GE Vernova (GEV) also dropped about 7.5%.

The sell-off was driven by multiple factors. In addition to investor concerns over stricter data center approvals in regions such as Texas and a slowdown in AI infrastructure buildout, the market was also reassessing the returns on AI capital expenditures by large tech companies. Qualcomm (QCOM) and Arm (ARM) posted earnings and guidance that fell short of market expectations, which, along with factors such as institutional selling, also exacerbated the decline in tech stocks.

If the start of data center projects is delayed, procurement plans for GPUs, servers, networking equipment, and power systems could be postponed accordingly, in turn affecting order and revenue expectations for related suppliers. However, it cannot yet be concluded based on this that companies have already delayed procurement.

In the near term, investors need to monitor the progress of existing environmental permitting and grid interconnection reviews in Texas, as well as whether Hinojosa pushes to pause approvals for new data centers after taking office.

She will take office on January 19, 2027, and has pledged to pause data center approvals until the state legislature enacts legislation to protect residents' interests. The specific scope and implementation timeline of the relevant policies remain to be clarified.

For SpaceX, the construction progress of its Texas data center and whether its computing power leasing business can continue to expand will affect market expectations for its AI business growth.

Meanwhile, for Nvidia, AMD, and data center equipment suppliers, investors need to monitor whether large projects are delayed and whether customers adjust procurement plans for GPUs, servers, and power equipment. These changes could impact order and revenue growth for related companies over the coming quarters.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.