Shares of Elon Musk’s Tesla Inc. and Space Exploration Technologies Corp. fell ahead of Wednesday’s US stock-market opening as Democrats swept to control of Congress, sharpening investor concern over the future of the Republican megadonor’s key holdings.
Tesla was down about 5% in premarket trading while SpaceX dropped 6.9% after the extent of the rebuke of President Donald Trump and his party became clear. That compares with small gains on futures for the S&P 500 and Nasdaq 100 indices.
Few CEOs are as closely tied to the president as Musk, the world’s richest person, who had poured nearly $450 million into GOP coffers and urged his 240 million X followers to vote against Democrats.
For investors in Tesla or SpaceX, a so-called blue wave in the midterm elections will come as a double blow. It will fan concerns about tighter regulations around artificial intelligence, and also creates more uncertainty over a potential merger of the electric vehicle maker and the rocket, AI and satellite giant.
“Guess my election-interfering space lasers didn’t work this time,” Musk wrote in a joking post on X. “Data centers in space looking pretty appealing right now.”
Also read: Gold and silver prices jump as US midterm results weaken dollar and Treasury yields
Heading into the midterms, the risk was particularly acute that 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.
SpaceX, 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 is largely treading water since its June initial public offering, holding on to a $1.9 trillion market valuation.
Tesla shares have rallied 34% since their late-July nadir amid investor optimism surrounding AI projects and the potential combination with SpaceX.
Ahead of voting, market watchers warned that Democratic dominance at the polls could strengthen the party’s ability to scrutinize Musk’s conduct and impede the anticipated tie-up.
Though Congress can’t singlehandedly kill a deal, empowered Democrats may be able to slow it down, said First New York’s Vikram Rai.
“Both of these stocks have major headline risk if we get a blue sweep,” Rai told Bloomberg in an interview last week.
Also read: US midterm election results LIVE
Already, Musk has weighed the importance of the US political environment; there’s a push to announce a Tesla-SpaceX deal by the first half of next year so that it can close while Trump is in office, Bloomberg has reported, according to people familiar with the matter.
The Democrats’ statewide sweep of Texas delivered a particular blow to Musk, who has based Tesla and SpaceX there and aligned himself with GOP politicians.
Tesla and SpaceX shares were under pressure early Wednesday “primarily because Texas has a new Democrat senator and that state is home to the HQs and a lot of the facilities of both Tesla and SpaceX, including the Colossus 3 data center,” AJ Bell investment director Russ Mould wrote in a note.
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 little more than a month. However, 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.
Plenty of uncertainty still lingers when it comes to the stocks. The merger remains in an exploratory phase; Tesla and SpaceX are burning through billions of dollars on product development; and plans for robotaxis, robots, and Martian colonies all remain years away from supporting the companies’ income statements.
“Ahead of elections, narratives and emotion are significant factors, but once they are behind us, fundamentals and reality take control,” said Nationwide Funds Group chief strategist Mark Hackett.