The midterm elections have dealt a major blow to Donald Trump and his Republican Party, as well as to one of his biggest backers, entrepreneur Elon Musk. The two major companies controlled by Musk—Tesla and SpaceX—have suffered a sharp stock market correction following the Democrats' unexpected victory in Texas and their majority in the U.S. Congress.
Tesla shares fell 3.3% on Wednesday, and on Thursday the decline accelerated, dropping another 10.77%. SpaceX shares fell 3.8% on the first day and another 9% on Thursday. In total, the market value loss for the two companies is approaching $469 billion, or about €417 billion at the current exchange rate. On Wednesday, the depreciation amounted to €110 billion.
Given that Elon Musk controls 35% of SpaceX and 11% of Tesla, the loss in value of his personal wealth is around $189 billion (€170 billion).
Markets have interpreted the election results as an increase in regulatory risks for the business empire of the South African tycoon, one of the main funders of the Republican Party in the midterm campaign .
Musk's business empire has benefited in recent years from a very lax tax regime in Texas, along with regulations highly favorable to the development of data centers for processing artificial intelligence algorithms, one of his major investments. He has also capitalized on SpaceX's consolidation as the primary supplier to the aerospace agency, NASA.
Analysts consulted by Bloomberg believe that a Democratic-controlled Congress could strengthen oversight of key sectors for Musk, such as AI, and complicate a potential integration between Tesla and SpaceX.
The market reaction has been furious, especially since both companies are headquartered in Texas , a state Musk has made the center of his operations. The entrepreneur moved his residence there in 2020 and relocated Tesla's headquarters the following year, after his clashes with California authorities during the pandemic. He also established his large Tesla car factory near Austin, his largest production facility in the United States.
“Texas becoming a Democratic state creates a new political challenge for Musk, especially considering how much money he has invested in making it the center of his business empire,” notes Ivan Feinseth, chief investment officer at Tigress Financial Partners.
The Democratic victory in Texas also has a symbolic dimension for the entrepreneur. The new governor, Gina Hinojosa , advocated during the campaign for greater control over data centers, essential infrastructure for the development of AI-related projects. The outcome of the Senate elections in the state has also been interpreted by some analysts as a sign of rejection of Musk's growing political influence.
The billionaire has strengthened his political involvement with Donald Trump and the Republican Party in recent years, having donated nearly $450 million to Republican candidates , of which some $205 million went to campaigns in Texas. According to various estimates, he has donated more money in these months than investor George Soros spent on the Democratic Party throughout his lifetime. Furthermore, Musk used his social network X (formerly Twitter) to openly urge people to vote against the Democrats during the election campaign.
After the results were announced, Musk reacted ironically on the same platform. “Guess my space lasers for interfering with the election didn’t work this time,” he wrote. In another message, he stated that “ data centers in space are starting to look pretty appealing.”
The new political landscape could have implications for some of their companies' strategic projects, such as the potential merger between Tesla and SpaceX . Several analysts believe that Democratic control of Congress could increase political and regulatory scrutiny of this deal.
Despite the decline in the value of Musk's companies, other electric vehicle manufacturers reacted in the opposite way. Rivian and Lucid saw their stock prices rise amid expectations that a Democratic majority will push for measures favorable to the energy transition.
One of the most common interpretations among fund investors is that Elon Musk has capitalized on the wave of deregulation championed by Donald Trump in recent years. In the early stages of Trump's presidency, the entrepreneur even served as an external advisor to the administration, heading the Department of Government Efficiency (DOGE), to try to cut public spending, much like Javier Milei's chainsaw campaign in Argentina. Ultimately, a disagreement between the president and Musk led to his temporary departure from the White House.
Beyond the midterm election results , doubts persist about the viability and timeline of several projects that underpin the high valuations of Musk's companies. The potential merger between Tesla and SpaceX remains in a preliminary stage, while initiatives such as robotaxis , humanoid robots, and Mars colonization plans continue to fall short of generating significant revenue.