Technology analyst Dan Ives has a message for Elon Musk: time to make nice with Texas.

Speaking with Anthony Pompliano on The Pomp Podcast on Tuesday, Ives said Musk needs to extend an "olive branch" to Texas officials to keep Space Exploration Technologies Corp.'s (NASDAQ:SPCX) artificial intelligence data-center ambitions on track after Democrats' midterm election victories. The reason is simple geography and politics. Texas remains central to SpaceX's infrastructure strategy, and Ives argued Musk cannot simply pick up the buildout and move it to Florida.

"He needs Texas. Texas needs him," Ives said.

Texas Election Raises Stakes For Musk

The political ground shifted when Democrat Gina Hinojosa won the Texas governor's race. Her victory has intensified scrutiny of new data centers. Hinojosa has advocated a pause on approvals pending stronger protections for electricity, water and communities, though she has also signaled a willingness to work with Musk's companies.

Ives had earlier warned that Democratic midterm gains could slow the "pace of the AI revolution," particularly in Texas. Reuters reported last week that Democratic victories raised questions about SpaceX's expansion and a possible merger with Tesla Inc. (NASDAQ:TSLA).

Even so, Ives is not backing off his big call. "I still believe SpaceX acquires Tesla," he said. He acknowledged that the changed political environment could impose additional regulatory obstacles, and he suggested SpaceX shares reflected a "20-25% discount" linked to political risk.

Texas Projects Make Negotiations Crucial

The stakes are not theoretical. According to a public hearing notice on Monday, SpaceX plans to build an approximately $24 billion gas-fired power plant and computing facility at Starbase. Local officials will consider its requested property-tax abatement on Dec. 9.

Separately, SpaceX secured tax incentives in June for its proposed Terafab chip manufacturing project in Grimes County, Texas, a joint venture with Tesla. The project envisages an initial investment of $55 billion, potentially rising to $119 billion across additional phases. Residents raised concerns about the development's potential strain on local power and water resources.

Orbital Data Centers Cannot Replace Texas Yet

Musk previously floated orbital data centers following Hinojosa's victory, but Ives argued that solution remains "so many years out." In the meantime, he said, "it's about building it out in Texas."

Asked whether Musk would negotiate, Ives replied, "He will come to the table. I do think the negotiation will happen." He cautioned that any agreement would take time, but maintained both sides have compelling reasons to reach one.

Price Action: SPCX shares were trading 1.18% lower at $138.10 in after-hours trading on Wednesday, according to market data.