Musk stocks lose $120 billion as Democrats’ Texas win rattles investors

Elon Musk’s Texas-based empire is coming under investor scrutiny after Democrats clinched unlikely wins in his adopted state on their way to take control of Congress.

Shares of Tesla Inc. and Space Exploration Technologies Corp. slumped 2.4% and 4.9%, respectively, after Democratic candidates prevailed in the state’s gubernatorial and Senate races, wiping out over $120 billion in combined market value as of 1:50 p.m. in New York on Wednesday. The party’s blowout nationwide victory adds another layer of risk since Musk is a prominent Republican donor.

Ahead of election day, market watchers warned that Democratic dominance at the polls could strengthen the party’s ability to hinder artificial intelligence development, scrutinize Musk’s conduct and impede an anticipated tie-up between Tesla and SpaceX. Winning control in Texas means Musk’s political opponents now have an easier path to obstruct his operations that bypasses a potential veto from the Oval Office.


“Texas turning blue creates a new political challenge for Musk, especially given how heavily he has invested in making the state the center of his business empire,” said Ivan Feinseth, chief investment officer at Tigress Financial Partners.

The broader market, as well as most of Tesla’s tech peers in the Magnificent Seven, have rallied Wednesday despite the blue wave, as investors bet that a Democrat-controlled Congress will slow the massive spending on AI that’s eating up free cash flow.

Still, both Tesla and SpaceX are headquartered in the Lone Star state where Governor-elect Gina Hinojosa ran partially on opposition to the unfettered expansion of data centers. The outcome of the Texas Senate race was also seen reflecting voter sentiment toward the Republican donor, as indicated in exit polls reported by CNN.

Few CEOs are as closely tied to President Donald Trump and his party as Musk, the world’s richest person as of Tuesday, who has poured nearly $450 million into GOP coffers — $205 million to Texas races alone — and urged his 240 million X followers to vote against Democrats.

“Guess my election-interfering space lasers didn’t work this time,” Musk joked on X, adding that “data centers in space looking pretty appealing right now.”

While relocating into the atmosphere may be years away, taking his companies to another state is a possibility. Musk moved to Texas in 2020 and brought Tesla along with him the following year amid pandemic-era clashes with California health officials, affordable housing and commuting constraints in the Bay Area, and SpaceX’s existing operations near Brownsville.

“I’m not convinced that it will be easy from a legal perspective to simply halt his businesses,” said Andrew Rocco, stock strategist at Zacks Investment Research. However, “if the Democrats are successful in stopping Musk’s ambitions, he will need to pivot to a new state.”

Musk and his businesses lie at the fault line of several divisive issues: Tesla and SpaceX are forging ahead in the AI race, their potential mega-merger raises regulatory questions, and access to a military version of the Starlink satellite service has become a point of tension between the US, Ukraine and Russia.

Tesla shares rallied 34% from their late-July nadir to Tuesday’s close amid investor optimism surrounding AI projects and the potential combination with SpaceX. The rocket, satellite and AI firm, which vaulted into the ranks of the world’s most valuable companies when it went public earlier this year, rakes in billions of dollars through US government contracts. The stock has largely treaded water since its June debut, holding on to a $1.9 trillion market valuation as of Tuesday.

David Meier, senior investment analyst at The Motley Fool, said the risk for Musk and his company is near-term retributions.

Already, Musk has weighed the importance of the US political environment: a push to announce a Tesla-SpaceX deal by the first half of next year while Trump is still in office was already underway. The election result may bring that forward.

“Speeding it up is the logical response,” said Adam Sarhan, chief executive officer of 50 Park Investments. “A Democratic Congress seated in January raises scrutiny risk on a deal of this size.”

Shares of Musk’s companies have proven sensitive to election results in the past. After Trump was re-elected in 2024, Tesla stock surged more than 90% over a little more than a month. The gains unwound as Musk’s relationship with Trump soured and investors grew tired with Musk’s side quest at the Department of Government Efficiency.

On Wednesday, shares of smaller, pure-play EV makers Rivian Automotive Inc. and Lucid Group Inc. were rallying on expectations a Democrat-led Congress would favor environment-friendly legislation, even as Tesla tumbled.

Even without the political headwinds, plenty of uncertainty lingers over Musk’s companies. The Tesla-SpaceX merger remains in an exploratory phase; both companies are burning through billions of dollars on product development; and plans for robotaxis, robots, and Martian colonies all remain years away from supporting massive revenue aspirations.

“It’s not hard to think that people like Musk are going to have a rough time over the next two years,” said Matt Maley, chief market strategist at Miller Tabak + Co.