While the US stock market surged on Wednesday, SpaceX and Tesla stocks were sliding. Democrats won both chambers of Congress and the Texas governor’s race, defeats that land squarely on Elon Musk’s companies.
Musk gave at least $446 million to Republican candidates and groups before the vote. Shareholders in his two public companies now face Democratic lawmakers who are reportedly weighing probes into his businesses.
Why Tesla and SpaceX Stocks Fell While Wall Street Rallied
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 stock rally.
Musk’s stocks moved the other way. 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, putting it below the $135 price at which it listed in June. The stock was still down about 4% after the open.
“Elon Musk’s Tesla and SpaceX are on track lose more than $130bn in market value amid fears the Democrats’ success in the midterm elections will derail the AI boom,” one user noted in a post.
The drops, which went against the broader US stock market rally, came as Democratic election gains raised concerns over regulatory scrutiny and Elon Musk’s political exposure.
Democrats have previously scrutinized federal contracts and subsidies flowing to Musk’s companies. Musk threatened to retaliate against any investigations.
How the Texas Governor Race Threatens SpaceX’s AI Plans
Democrat Gina Hinojosa unseated Gov. Greg Abbott. She wants an immediate halt to new data centers, the warehouse-sized computer sites that power artificial intelligence (AI) tools, and an end to their tax breaks.
That matters for SpaceX. The Texas-based company 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.”
The other side of the argument has a ceiling.
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.
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