Tesla and SpaceX stocks fell on Wednesday while the broader US stock market surged, as investors weighed the impact of Democratic victories in the midterm elections on Elon Musk’s companies.
Democrats won both chambers of Congress and the Texas governor’s race, outcomes that could increase regulatory pressure on Musk’s businesses. Musk gave at least $446 million to Republican candidates and groups before the vote, according to the report.
Market Divergence
Investors welcomed the prospect of a divided government and lower Treasury yields. The S&P 500 rose 1.2% in early trading, while the Dow added more than 1,100 points, fueling a broad post-midterm rally.
Musk’s stocks moved in the opposite direction. Tesla traded at $379 before the opening bell, down 4.89%, according to Yahoo Finance. SpaceX fell 5.67% to $133.30 in premarket trading, below the $135 price at which it listed in June. The stock was still down about 4% after the open.
One social media user noted that Tesla and SpaceX were on track to lose more than $130 billion in market value amid fears that the Democrats’ success would derail the AI boom.
The drops came as Democratic election gains raised concerns over regulatory scrutiny and Musk’s political exposure. Democrats have previously scrutinized federal contracts and subsidies flowing to Musk’s companies. Musk threatened to retaliate against any investigations.
Texas Governor Race and SpaceX’s AI Plans
Democrat Gina Hinojosa unseated Gov. Greg Abbott. She wants an immediate halt to new data centers and an end to their tax breaks. That matters for SpaceX, which has planned AI computing capacity at its Starbase launch site near Boca Chica. Hinojosa also opposes a potential sale of a beachfront state park to SpaceX.
“Let me be clear: Texas is not for sale,” she said.
Against the backdrop of Hinojosa’s victory, Musk hinted in a post that he anticipated more friction in his data center plans in Texas, joking that set-ups in space had better prospects now.
“Data centers in space looking pretty appealing right now.”
Fundstrat’s Tom Lee wrote before the results that President Donald Trump would veto any anti-AI or anti-data-center bills. The Democratic sweep was also the first condition in Evercore’s worst-case midterm scenario for US stocks.
