Shares of Tesla and SpaceX fell sharply on Wednesday after Democrats secured control of both chambers of Congress in the US midterm elections. Elon Musk, the CEO of both companies, had spent a record $474 million backing Republican candidates, including more than $224 million in Texas alone, where Tesla and SpaceX are headquartered. The losses came despite a broader market rally, with the Dow Jones Industrial Average rising 3%, the S&P 500 gaining 1.6%, and the Nasdaq Composite up 1.4% following the election results.
Musk’s political spending backfires as Democrats sweep midterms
Musk’s contributions, which made him the largest individual donor in the 2026 midterms, were aimed at helping Republicans retain control of Congress and maintain dominance in Texas. However, Democrats flipped key races, including the Texas Senate and governor’s contests, where Musk had heavily invested in Republican candidates. Ken Paxton, the Republican attorney general, lost his Senate bid to Democrat James Talarico, while Greg Abbott was defeated by Gina Hinojosa in the governor’s race. Both losses occurred despite Musk’s financial backing, which included $158 million to the Senate Leadership Fund and $150 million to the America PAC.
Market reaction reflects investor concerns over policy shifts
The election results triggered a 5% drop in SpaceX shares and a 2% decline in Tesla stock during Wednesday trading. Analysts cited concerns over potential regulatory scrutiny and policy changes under a Democratic-controlled Congress. SpaceX’s planned data centers in space also faced renewed scrutiny, with Musk joking on X (formerly Twitter) that his "election-interfering space lasers" had failed. The broader tech sector saw mixed reactions, with Nvidia and TSMC shares slipping, while Microsoft, Amazon, and Alphabet remained relatively stable.
Musk’s Texas focus backfires as state turns ‘blue’
Texas, where Musk reincorporated both Tesla and SpaceX, was a central focus of his political spending. His $224 million investment in the state was intended to solidify Republican control, but voters instead delivered a stunning rebuke, flipping long-held GOP strongholds. Musk had previously lobbied Texas Republicans to rewrite state corporate laws to benefit his companies, including a $6.3 billion government contract secured during his tenure as head of the Department of Government Efficiency (DOGE) under former President Donald Trump.
Congressional Democrats signal investigations into Musk’s government ties
With Democrats now in control of Congress, Rep. James Walkinshaw (D-Va.) and other lawmakers have indicated plans to investigate whether Musk used his influence in the Trump administration to benefit his businesses. $16.3 billion in government contracts awarded to Musk’s companies since Trump’s return to office are under scrutiny, raising questions about potential conflicts of interest. Musk’s DOGE role, which he left amid a public feud with Trump, has drawn particular attention, with critics alleging he exploited his position to secure favorable deals for Tesla and SpaceX.
Tech billionaires’ midterm spending draws criticism and debate
Musk was not alone in his election spending. Other tech leaders, including Larry Ellison ($45 million), Michael Dell ($6.25 billion), and Marc Benioff, also contributed heavily to Republican causes. However, the scale of Musk’s donations—$474 million, nearly double the next-largest donor—made him a focal point of criticism. Virgin Group founder Richard Branson publicly condemned the record spending, calling for campaign finance reform on LinkedIn. Meanwhile, LinkedIn co-founder Reid Hoffman criticized the lack of transparency in political donations, arguing that such spending undermines democratic processes.
Long-term implications for Musk’s companies and policy battles
The midterm results could reshape the regulatory landscape for Musk’s businesses. A Democratic-controlled Congress may push for stricter oversight of AI development, environmental regulations affecting Tesla, and contracting transparency for SpaceX. Additionally, Musk’s recent relocation of Tesla’s headquarters to Texas and his lobbying for favorable state laws could face renewed scrutiny. Analysts suggest that the political shift may force Musk to reassess his strategy, particularly in states where his companies operate.
Musk responds with humor and pivot to new ventures
In the aftermath of the election, Musk took to X to downplay the losses, joking that his "election-interfering space lasers" had failed and that data centers in space were now a more appealing venture. He also deleted a pre-election post urging voters to "Vote red", which had been widely shared as the results came in. The deletions and subsequent posts reflected a shift in tone, as Musk appeared to acknowledge the political setback while focusing on his companies’ future endeavors.
Historical context: Midterms and market performance
Midterm elections have historically been followed by market rallies, regardless of which party wins, due to reduced political uncertainty. However, Musk’s companies bucked this trend, with Tesla and SpaceX underperforming the broader market. The divergence highlights the unique risks facing companies tied to high-profile political donors, particularly in sectors like electric vehicles, space exploration, and AI, which are subject to regulatory and policy shifts.
Key takeaways for investors and policymakers
- Musk’s political spending failed to sway key races, resulting in losses for his preferred candidates and a drop in his companies’ stock prices.
- Democrats’ control of Congress could lead to increased scrutiny of Musk’s government contracts and business practices.
- Texas’ political shift may force Musk to rethink his operational and lobbying strategies in the state.
- Broader tech sector reactions were mixed, with some companies benefiting from the market rally while others faced declines.
- Calls for campaign finance reform have intensified, with critics arguing that record spending by billionaires distorts democratic processes.