Tesla and SpaceX lose over $420 billion in market value after US midterms
Shares fell as investors weighed possible congressional probes and stricter regulation after Democrats won both chambers of Congress.
At a glance
- SpaceX and Tesla shares fell about 9% and 11% Thursday, cutting over $420 billion in combined market value since Tuesday's close.
- Musk gave over $470 million to GOP candidates and causes, but Democrats won the House and Senate and most candidates he backed lost.
- Deutsche Bank analysts said SpaceX could face incremental headwinds, delays to Texas compute capacity and higher capital expenditures.
Shares of SpaceX and Tesla dropped about 9% and 11%, respectively, on Thursday afternoon, as investors weighed the possibility of new congressional probes and stricter regulation after the U.S. midterm elections. The declines, which tracked a broader tech sell-off, cut more than $420 billion from the two companies' combined market value since Tuesday's close. By the end of Thursday's session, the losses had reached about $456 billion.
The political backdrop is central. Musk was the largest donor to Republican candidates and causes in the midterms, giving more than $470 million, according to the Financial Times. Despite that spending, most of the candidates he backed lost. Democrats won control of both the House and Senate. In Texas, where Tesla and SpaceX are headquartered, Sen.-elect James Talarico and Gov.-elect Gina Hinojosa defeated longtime Musk allies state Attorney General Ken Paxton and Gov. Greg Abbott.
Wealth and business risks
Musk's wealth, which had topped $1 trillion after SpaceX's initial public offering in June, has fallen below $800 billion. It dropped about $90 billion in the past week, according to Forbes. He remains the richest person in the world.
Deutsche Bank analysts said policy is hard to predict but that SpaceX could face incremental headwinds in the current environment. They noted that Gov.-elect Hinojosa made data centers a major campaign issue, calling for a moratorium on new approvals until the legislature passes stronger protections on water use, electricity costs, local control and incentives. She also criticized tax breaks for large facilities.
Tesla and SpaceX are both building AI infrastructure in Texas. They plan to build Terafab, a large facility that will include a data center and a semiconductor factory, in Grimes County. SpaceX also plans a supercomputer at its Starbase launch facility and company town, according to job listings. Deutsche Bank analysts said SpaceX's Texas compute capacity could be delayed, and that the company may need to increase capital expenditures to meet anticipated tighter data-center regulations.
Probes and merger questions
Musk and SpaceX have been instructed to preserve records about restrictions placed on a military version of the Starlink satellite internet service in Ukraine, CNN first reported, citing an aide to a Democratic senator. The restrictions hampered Ukraine's ability to defend against attacks by Russia.
Regulatory scrutiny could also block any chance for Musk to merge SpaceX and Tesla, an idea he has promoted, though he has acknowledged shareholders would need to approve it first.
Source: CNBC Top News.
Questions and answers
- Why did Tesla and SpaceX shares fall after the midterms?
- Investors worried Elon Musk could face new congressional probes and his companies stricter regulation after Democrats won control of the House and Senate. The declines came during a broader tech sell-off.
- How much did Elon Musk's wealth drop?
- Musk's wealth, which had topped $1 trillion after SpaceX's June IPO, fell below $800 billion and dropped about $90 billion in a week, according to Forbes. He remains the world's richest person.
- What regulatory risks do Tesla and SpaceX face in Texas?
- Gov.-elect Gina Hinojosa made data centers a campaign issue and called for a moratorium on new approvals until stronger protections pass. Deutsche Bank said SpaceX's Texas compute capacity could face delays and higher capital expenditures.
