WASHINGTON: Democrats have swept to control of the US Congress in a mid-term landslide, weighing on the shares of Republican mega-donor Elon Musk’s Tesla Inc and Space Exploration Technologies Corp.
Ahead of yesterday’s open, Tesla fell about 5% in premarket trading while SpaceX dropped 6.9% after Democrats took control of Congress.
Anger over the cost of living and the war in Iran delivered a thundering rebuke of President Donald Trump and his party just two years after his dominant White House comeback.
The Democrats’ statewide sweep of Texas delivered a particular blow to Musk, who has based Tesla and SpaceX there and aligned himself with the Grand Old Party’s (GOP) politicians.
For investors holding shares in either or both of the companies, a so-called blue wave in the mid-terms will come as a double whammy.
It will fan concerns about tighter regulations around artificial intelligence (AI), and also call into doubt a potential merger of the electric vehicle maker and the rocket, AI and satellite giant.
“Data centres in space looking pretty appealing right now,” Musk wrote in a post on X.
“Though Congress can’t single-handedly 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.
Tesla shares have rallied 34% since their late-July nadir amid investor optimism surrounding AI products and the potential combination with SpaceX.
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 mammoth US$1.9 trillion market valuation.
Heading into the mid-terms, the risk was particularly acute that Musk and his businesses lie at the fault line of several divisive issues: Tesla and SpaceX are forging forward 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 United States, Ukraine, and Russia.
Ahead of voting, market watchers warned that Democratic dominance at the polls could strengthen the party’s ability to scrutinise Musk’s conduct and impede the anticipated tie-up.
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 sources.
Few chief executive officers are as closely tied to US President Donald Trump and Maga Republicans as Musk.
The world’s richest man served as a White House adviser early last year and now co-leads a new Defence Department initiative. In the run-up to the mid-terms, Musk poured nearly US$450mil into GOP coffers and bandied his 240 million X followers against voting for Democrats.
Shares of the former-trillionaire’s companies have proven to be 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. — Bloomberg
