The midterm elections have been a major upset for Donald Trump and his Republican Party. Also for one of his great supporters, the businessman Elon Musk.
The two large companies controlled by Musk—Tesla and SpaceX—have suffered a strong stock market correction following the unexpected victory of the Democrats in the state of Texas and their majority in the United States Congress. Tesla shares sank 3.3% yesterday, and today they opened with an even greater drop, of 9.5%. Those of SpaceX fell 3.8% yesterday and another 8% today. In total, the loss in market value is close to $362.5 billion between the two companies. About 323,000 million euros at the current exchange rate. In yesterday's session, the depreciation amounted to 110,000 million euros.
Taking into account that Elon Musk controls 35% of SpaceX and 11% of Tesla, the loss in value of his personal assets is around $84 billion (€79 billion).
The markets have interpreted the election results as an increase in regulatory risks for the business empire of the South African tycoon, one of the main financiers of the Republican Party in the midterms campaign.
Musk's business empire has benefited in recent years from a very lax tax regime in Texas, along with regulation very favorable to the development of data centers to process artificial intelligence algorithms, one of his big bets. It has also benefited from the consolidation of SpaceX as the main supplier to the aerospace agency, NASA.
Analysts consulted by Bloomberg consider that a Congress under Democratic control could reinforce supervision of key sectors for Musk, such as AI, in addition to complicating an eventual integration between Tesla and SpaceX.
The market reaction is furious, especially because both companies are based in Texas, a state that Musk has made the center of his operations. The businessman moved his home there in 2020 and moved Tesla's headquarters the following year, after his confrontations with California authorities during the pandemic. In addition, it installed its large Tesla car factory near Austin, its largest production center in the United States.
“Texas becoming a Democratic state creates a new political challenge for Musk, especially given how much money he has invested in making it the center of his business empire,” says Ivan Feinseth, investment director at Tigress Financial Partners.
The Democratic victory in Texas also has a symbolic dimension for the businessman. The new governor, Gina Hinojosa, defended during the campaign greater control over data centers, fundamental infrastructure for the development of projects linked to AI. The result of the Senate elections in the State has also been interpreted by some analysts as a sign of rejection of Musk's growing political influence.
In recent years, the billionaire has reinforced his political involvement with Donald Trump and the Republican Party, after allocating nearly $450 million to Republican candidates, of which about $205 million went to campaigns in Texas. According to various calculations, he has donated more money in recent months than investor George Soros disbursed to the Democratic Party throughout his life. In addition, Musk used his social network X (former Twitter) to openly ask to vote against the Democrats during the election campaign.
After knowing the results, Musk reacted with irony on that same platform. “Guess my space lasers for interfering in the election didn't work this time,” he wrote. In another message he stated that “data centers in space are starting to look quite attractive.”
The new political scenario could have implications for some of the strategic projects of their companies, such as the possible merger between Tesla and SpaceX. Several analysts consider that Democratic control of Congress could increase political and regulatory scrutiny of this operation.
Despite the loss of value of Musk's companies, other electric vehicle manufacturers reacted in the opposite direction. Rivian and Lucid registered stock market gains in the expectation that a Democratic majority will promote measures favorable to the energy transition.
One of the most common readings by fund investors is that Elon Musk has relied in recent years on the wave of deregulation championed by Donald Trump. In the early stages of his mandate, the businessman came to serve as an external advisor to his Government, heading the Department of Government Efficiency (DOGE), to try to cut public spending, in the purest style of Javier Milei's chainsaw in Argentina. Finally, a disagreement between the president and Musk caused his temporary departure from the White House orbit.
