Midterm gamble, sliding stocks: Elon Musk's pricey election hangover continues

Democrats won control of both chambers of Congress in the midterm elections. Gina Hinojosa also defeated Greg Abbott in Texas, ending more than three decades of Republican rule there. The result was a major setback for Donald Trump, Elon Musk and other Republican allies who had expected to preserve Republican control.

Musk had spent nearly half a billion dollars backing Republican candidates. He urged followers on X to vote Republican and hoped to help keep Congress Republican and Texas red. That spending did not overcome voter concerns about utility bills, grocery prices and fuel costs, according to analyst Jake Dollarhide.

The new political balance could affect Musk beyond elections. Democrats may investigate his companies, scrutinize government contracts and subsidies, and challenge policies linked to his leadership at DOGE. Texas officials may also block or delay data-centre projects and oppose proposed expansion at SpaceX’s Starbase complex.

Musk’s companies moved sharply in the opposite direction from the wider US market after Republicans lost control of Washington. Tesla shares fell 3.6%, while SpaceX shares dropped 3.2% in Wednesday trading. Both underperformed the broader market, showing that investors treated the election as a company-specific risk for Musk’s businesses.

The contrast was clear. The S&P 500 rose 1.5%. The Dow Jones Industrial Average gained 1,325 points, or 2.6%. The Nasdaq Composite climbed 1.7%. These figures were recorded at 11.15 am Eastern time, while Tesla and SpaceX were under pressure.

The market reaction may reflect concerns about investigations, regulation and delays to major projects. Democrats could scrutinize Musk’s companies, government contracts and subsidies. They could also increase oversight of AI data centres, potentially raising costs or slowing SpaceX’s planned capacity expansion and revenue growth.

Musk’s political investment was nearly half a billion dollars. He directed that money toward Republican candidates during the midterm elections. The scale made him a major financial supporter of the party and one of its most visible allies.

The spending had two main goals. Musk hoped Republicans would retain control of Congress. He also wanted to help keep Texas red, meaning under Republican control. He publicly urged his followers on X to vote Republican as recently as the Tuesday before the results.

The strategy failed. Democrats won both chambers of Congress, and Gina Hinojosa defeated Greg Abbott in Texas. The outcome showed that Musk’s large financial contribution could not overcome voter concerns about higher utility bills, grocery prices and gas-pump costs, according to Jake Dollarhide. It also left Musk facing a resurgent Democratic Party he had antagonised for years.

Democratic control of Congress could bring greater scrutiny to Musk and his businesses. Democratic lawmakers have already questioned restrictions on satellite communications used by Ukraine’s military, mass federal job cuts carried out under Musk’s leadership at DOGE, and government contracts and subsidies received by his companies.

Congressional investigations could examine how those decisions were made and whether Musk’s companies benefited from public support. Robert Garcia, expected to become House Oversight Committee chair, warned Republicans and their allies to “Lawyer up.” Musk had also threatened retaliation on X after reports that Democrats were considering investigations if they won.

The consequences could extend beyond hearings. Democrats may apply regulatory pressure to technology and AI, while increased oversight could delay projects or raise compliance costs. Greater scrutiny of contracts and subsidies could affect company finances and investor confidence, especially as Tesla and SpaceX shares already fell after the election.

Approvals matter because SpaceX’s AI business depends on large data centres that rent computing power to customers. The company’s Colossus and Colossus II facilities near Memphis have helped drive revenue growth and enabled SpaceX to post its first profit as a public company. New projects are therefore central to its expansion plans.

SpaceX wants to increase data-centre capacity from 1.7 gigawatts at the end of September to as much as 3 gigawatts by the end of this year. It plans to reach 13 gigawatts next year. SemiAnalysis has identified more than 9 gigawatts of planned or developing capacity, including facilities at Starbase in Texas.

Democrats and local opponents could push for construction moratoriums because of electricity costs. Texas’s incoming governor, Gina Hinojosa, has called for an immediate halt to new projects and an end to tax breaks. Delays could hurt revenue targets and intensify investor concerns about AI infrastructure costs.

An AI data centre is a facility that houses powerful computers for training, running and supporting artificial-intelligence systems. In the article’s example, SpaceX rents computing power from Colossus and Colossus II to customers including Paradox. These facilities turn large amounts of computing capacity into a commercial service.

AI workloads require many high-performance processors working together. Those machines consume substantial electricity while processing data and producing results. The facility also needs networking equipment, storage, cooling systems and reliable power connections. Together, these requirements explain why data centres are measured in gigawatts and why new projects can affect local electricity costs.

SpaceX had 1.7 gigawatts of capacity at the end of September and wants as much as 3 gigawatts by year-end, then 13 gigawatts next year. Political delays or construction moratoriums could slow this expansion and put revenue targets under pressure.

Political control affects private companies because governments set regulations, approve projects and decide how public money is used. A new majority can change scrutiny of industries, government contracts, subsidies and tax breaks. It can also influence whether companies receive approvals for facilities that depend on public infrastructure and local cooperation.

The article gives several examples. Democrats may investigate Musk’s companies, question satellite communications restrictions and examine DOGE-related federal job cuts. In Texas, Gina Hinojosa has called for a halt to new data-centre projects and an end to industry tax breaks. She has also opposed a possible state-park sale to SpaceX.

These changes can alter business plans and investor expectations. SpaceX’s data-centre expansion could face delays, while higher infrastructure costs could weaken revenue targets. The election was followed by Tesla and SpaceX share declines even as major US stock indexes rose, suggesting investors saw additional political risk for Musk’s businesses.