EspaceX And Tesla stocks fell about 9% and 11%, respectively, on Thursday afternoon as investors feared that Elon Musk could face new congressional investigations – and tighter regulation of his companies – after the US midterm elections.
These declines, correlated with a broader selloff in tech stocks, brought SpaceX and Tesla’s overall market capitalization losses to more than $420 billion since Tuesday’s close.
Elon Musk’s wealth, which topped $1 trillion after SpaceX’s IPO in June, is now less than $800 billion, after falling by about $90 billion last week, according to Forbes. He remains the richest man in the world.
Musk was the largest donor to Republican Party candidates and causes in the midterms, with his financial contributions topping $470 million, the Financial Times first reported.
Despite the Republican Party’s war chest strengthening, most of the Musk-backed candidates lost their races.
Democrats took control of the House and Senate. And in Texas, where Tesla and SpaceX are headquartered, Democratic Sen.-elect James Talarico and Gov.-elect Gina Hinojosa defeated Musk’s longtime allies, state Attorney General Ken Paxton and Gov. Greg Abbott.
Deutsche Bank analysts wrote in a note Wednesday: “While politics is understandably difficult to predict, we could imagine SpaceX facing incremental headwinds in this type of environment.”
Gov.-elect Hinojosa “has made data centers a major issue in his campaign,” analysts noted, calling for “a moratorium on new approvals until the Legislature enacts stronger protections on water consumption, electricity costs, local control and incentives,” and criticizing tax breaks for large facilities.
Tesla and SpaceX are both building AI infrastructure in Texas and plan to build Terafab, a massive facility that will include a data center and a large semiconductor factory, in Grimes County, Texas.
SpaceX also plans to build a “supercomputer” at its Starbase, Texas, launch facility and in its company city, according to company job postings.
Deutsche Bank analysts also wrote that SpaceX’s computing capacity in Texas could now experience delays. The company’s capital spending may need to increase to meet the demands of anticipated stricter regulations around data center construction, analysts wrote.
Musk and SpaceX have been tasked with keeping records regarding restrictions on a military version of the Starlink satellite internet service in Ukraine, CNN first reported, citing an aide to a Democratic senator. The restrictions have hampered the country’s ability to defend itself against attacks from Russia.
Additionally, regulatory scrutiny could block Musk’s chances of merging SpaceX and Tesla, an idea he has promoted while acknowledging that shareholder approval would be required first.
SpaceX and Tesla had lost about $456 billion in market capitalization as of close of business Thursday.
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