Tesla and SpaceX Shed $420 Billion in Value After Midterms Cloud Musk's Texas Plans

Tesla fell about 9% and SpaceX about 11% on Thursday afternoon, according to CNBC, as part of a wider technology selloff. Al Jazeera's midday figures had the order reversed, with Tesla down more than 11% and SpaceX down 9.5%. Musk's net worth, which passed $1 trillion after SpaceX's initial public offering in June, has fallen below $800 billion, about $90 billion lower than a week ago, according to Forbes. He remains the world's richest person.

The losses matter beyond Musk's fortune because both companies have tied their growth plans to AI infrastructure in a state that has just elected a governor who campaigned against data centres. Tesla and SpaceX plan to build Terafab, a site in Grimes County, Texas, combining a data centre with a large semiconductor factory. SpaceX also plans a supercomputer at its Starbase launch site, according to company job listings cited by CNBC.

A Costly Election Bet

Musk was the largest donor to Republican candidates and causes in the midterms, giving more than $470 million, a figure the Financial Times first reported. Most of the candidates he backed lost. Democrats won control of both the House and the Senate, and in Texas, where both companies are headquartered, James Talarico won the Senate race and Gina Hinojosa the governorship, beating Musk allies Ken Paxton and Greg Abbott.

Musk spent $230 million trying to defeat Talarico and $5 million backing Hinojosa's opponent, according to Al Jazeera, along with $500,000 in the lieutenant governor's race won by Democrat Vikki Goodwin.

Deutsche Bank analysts wrote in a note on Wednesday that they "could envision SpaceX facing some incremental headwinds in this type of backdrop." They noted that Hinojosa had called for a moratorium on new data centre approvals until the state legislature passes stronger protections on water use, electricity costs, local control and incentives, and had criticised tax breaks for large facilities. The analysts said SpaceX's Texas compute capacity could face delays and that its capital spending might have to rise to meet tighter rules.

Merger and Starlink Questions

The new political map could also complicate a combination of SpaceX and Tesla, an idea Musk has promoted while acknowledging that shareholders would have to approve it. "We will believe a SpaceX/Tesla merger happens but now faces a much tougher regulatory roadmap to get this deal done in 2027 given this new political blue roadmap in DC/Texas," Dan Ives, managing partner of Yorkville Ives, wrote in a note on Thursday.

Congressional oversight has already begun. Musk and SpaceX have been told to preserve records about restrictions they placed on a military version of the Starlink satellite internet service in Ukraine, CNN reported, citing an aide to a Democratic senator. The restrictions hampered Ukraine's ability to defend against Russian attacks.

The new Congress is sworn in in January, when Democratic committee chairs will gain the power to compel testimony and documents.