Elon Musk's companies moved quickly to reflect the political wind after the U.S. midterm election results were released. SpaceX fell about 9% by Thursday's close and Tesla slid about 11%, erasing roughly $456 billion in combined market value since Tuesday's close. After SpaceX completed its initial public offering this year, Musk's personal net worth briefly surpassed $1 trillion, but it has now fallen below $800 billion. His wealth has declined by about $90 billion over the past week, though he remains the world's richest person.
The sell-off coincided with a broader pullback in technology stocks, but Musk-linked companies were hit harder. Investors began reassessing the potential regulatory cost of his political spending during the midterms. Musk poured more than $470 million into Republican candidates and related political organizations, but most of the candidates he backed lost. With Democrats retaking control of both chambers of Congress, investors fear Musk himself could face new congressional investigations, while his companies and their AI and data-center expansion plans may encounter stricter regulatory scrutiny.
Changes in Texas politics have deepened those concerns. Tesla and SpaceX both have major operations in the state. Democrat James Talarico won a Senate seat, and Gina Hinojosa won the governorship, defeating Ken Paxton, the state attorney general who has long been closely aligned with Musk, and Governor Greg Abbott. During her campaign, Hinojosa made data-center construction a central issue and called for a pause on approving new large data-center projects until the state legislature tightens rules on water use, electricity prices, local control and fiscal incentives.
Analysts said stricter Texas regulation of data-center construction could delay approvals and raise capital spending for SpaceX's computing expansion. Tesla and SpaceX are both advancing AI infrastructure projects in Texas. The Terafab project in Grimes County includes data centers and large-scale semiconductor manufacturing facilities, while Starbase is also planned to host a supercomputer. For technology companies scaling up computing investment, changes in approvals for power, water and infrastructure could directly affect project timelines, costs and future earnings expectations.
SpaceX faces another more sensitive federal-level risk. Musk and SpaceX have been asked to preserve records related to restrictions on Starlink's military applications, including previous limits on Ukraine's use of the satellite internet service. With Democrats controlling Congress, the issue could come within the scope of legislative oversight, placing SpaceX's defense contracts with the U.S. government, Starlink's military uses and Musk's role in related decisions under further scrutiny.
The shifting regulatory environment also adds uncertainty to Musk's earlier idea of merging SpaceX and Tesla. Musk has publicly floated the concept and said any merger would require shareholder approval. If Congress and regulators intensify reviews of antitrust, defense contracts, AI infrastructure or corporate governance, the chances of approving such a large transaction could decline.
Earlier, markets focused more on whether Musk's relationship with the Trump administration could bring policy support for Tesla, SpaceX and his AI businesses. After the midterms, attention has shifted to congressional investigations, data-center regulation, defense contract reviews and potential antitrust issues. The outlook for SpaceX and Tesla will still depend on whether congressional investigations advance, how Texas adjusts data-center approval rules, and how Starlink-related record-keeping requirements affect defense contract reviews.
