"Blue Wave" Rattles Musk's Business Empire: Tesla, Inc. (TSLA.US) and SpaceX (SPCX.US) Fall Over 5%

Notice that as Democrats swept to control of Congress, shares of Elon Musk's Tesla, Inc. (TSLA.US) and SpaceX (SPCX.US) fell in pre-market trading on Wednesday, deepening investor concerns about the core assets of the Republican mega-donor. After the extent of the defeat suffered by President Trump and his party became clear, Tesla, Inc. fell about 5% in pre-market trading and SpaceX dropped 6.9%, while S&P 500 and Nasdaq 100 futures edged higher. Few CEOs are as closely tied to the president as Musk. The world's richest person had poured nearly $450 million into Republican causes and urged his 240 million X followers to vote against Democrats. For investors in Tesla, Inc. or SpaceX, the so-called "blue wave" in the midterm elections would amount to a double blow: it would heighten concerns about stricter regulation of artificial intelligence, while also increasing uncertainty over a potential merger between the electric-vehicle maker and the rocket, AI and satellite giant. "Looks like my 'election interference' space lasers didn't work this time," Musk wrote in a joking post on X. "Space data centers are looking pretty attractive now." The risks were especially pronounced heading into the midterms because Musk and his companies sit at the intersection of multiple contentious issues: Tesla, Inc. and SpaceX are pushing hard in the AI race, their potential mega-merger raises regulatory questions, and access to military-grade Starlink satellite services has become a flashpoint in tensions among the United States, Ukraine and Russia. SpaceX listed earlier this year, vaulting into the ranks of the world's most valuable companies and generating billions of dollars in revenue through U.S. government contracts. Since its June IPO, the stock has traded largely sideways, holding a market value of $1.9 trillion. Tesla, Inc. shares have risen 34% since their late-July low, with investors optimistic about AI projects and the prospect of a potential merger with SpaceX. Before the vote, market watchers had warned that a strong Democratic showing could strengthen the party's ability to scrutinize Musk's actions and hinder the merger deal the market expects. Vikram Rai of First New York said that while Congress cannot block a deal on its own, emboldened Democrats may be able to slow its progress. "If there's a blue wave, both stocks face significant headline risk," Rai said in an interview last week. Musk is already weighing the importance of the U.S. political environment. According to Bloomberg, which cited people familiar with the matter, there is a push to announce a Tesla, Inc.-SpaceX deal in the first half of next year so it can be completed during Trump's term. A statewide Democratic victory in Texas is especially painful for Musk he based Tesla, Inc. and SpaceX headquarters in the state and has aligned himself with Republican politicians. AJ Bell investment director Russ Mould wrote in a report that Tesla, Inc. and SpaceX shares came under pressure early Wednesday "mainly because Texas has gained a new Democratic senator, and that state is home to both companies' headquarters and a large number of their facilities, including the Colossus 3 data center." Shares of Musk's companies have historically been sensitive to election outcomes. After Trump's re-election in 2024, Tesla, Inc. shares rose more than 90% in just over a month. But those gains have been given back as Musk's relationship with Trump deteriorated and investors grew weary of Musk's "side job" at the Department of Government Efficiency (DOGE). Significant uncertainty remains for both stocks: the merger is still in the exploratory stage; Tesla, Inc. and SpaceX are investing billions of dollars in product development; and initiatives such as Robotaxi, Siasun Robot&Automation and Mars colonization are still years away from truly supporting the companies' income statements. "Before elections, narrative and sentiment are important factors, but once the election is over, fundamentals and reality will take over again," said Mark Hackett, chief strategist at Nationwide Funds Group.