Tesla and SpaceX Slide as Democratic Election Gains Raise Risk

Shares of SpaceX and Tesla declined on Wednesday even as the broader US equity market rallied. Democratic victories in Congress and the Texas governor's election directly hit Elon Musk's businesses.

Before the election, Musk contributed at least $446 million to Republican candidates and political organizations. Investors in his two publicly traded companies are now dealing with Democratic legislators who, according to reports, may launch investigations into his ventures.

What Caused Tesla and SpaceX to Drop While Markets Rose

Market participants embraced the outlook for a split government and declining Treasury yields. The S&P 500 climbed 1.2% in early trade, and the Dow Jones Industrial Average gained over 1,100 points, boosting a broad rally after the midterms.

Musk's shares went in the opposite direction. Tesla changed hands at $379 ahead of the market open, a decline of 4.89%, as reported by Yahoo Finance.

SpaceX dropped 5.67% to $133.30 in premarket activity, pushing it under the $135 price from its June listing. The stock remained roughly 4% lower once the market opened.

“Elon Musk's Tesla and SpaceX are on track lose more than $130bn in market value amid fears the Democrats' success in the midterm elections will derail the AI boom,” one user noted in a post.

The declines, which ran counter to the overall Wall Street advance, occurred as Democratic electoral successes fueled worries about increased regulatory oversight and Musk's political vulnerability.

Democratic lawmakers have previously examined federal contracts and subsidies directed toward Musk's companies. Musk threatened to retaliate against any investigations.

Live by the sword, die by the sword.

Those who pick fights with me should understand that I will find out who is really pulling the strings and come for them, not just their puppets … https://t.co/L7xNa6yCm0

— Elon Musk (@elonmusk) October 21, 2026

Texas Governor Race Outcome Could Disrupt SpaceX's AI Ambitions

Democrat Gina Hinojosa defeated Governor Greg Abbott. She is calling for an immediate stop to new data center construction, the vast computing facilities that drive AI, and for eliminating their tax incentives.

This development is significant for SpaceX. The Texas-headquartered firm has intended to build AI computing infrastructure at its Starbase facility near Boca Chica.

Hinojosa is also against any possible sale of a coastal state park to SpaceX.

“Let me be clear: Texas is not for sale,” she said.

Following Hinojosa's win, Musk suggested in a post that he expects increased resistance to his data center projects in Texas, quipping that space-based installations now look more promising.

“Data centers in space looking pretty appealing right now.”

The opposing case has its limits.

Before the election results, Fundstrat's Tom Lee stated that President Donald Trump would veto any legislation opposed to AI or data centers.

🚨 FUNDSTRAT'S TOM LEE (@fundstrat) ON WHY A DEMOCRATIC CONGRESS ISN'T BEARISH FOR TECH, AI AND CRYPTO:

"The reason stocks and crypto have been selling off into a midterm election day is because if Democrats take control of Congress, they've been very vocal that they're anti-AI, … https://t.co/u0328kbIjA pic.twitter.com/aVpCBHP1jJ

— WOLF Terminal (@WOLF_Terminal) November 4, 2026

The Democratic victories also represented the first factor in Evercore's worst-case midterm scenario for US stocks.