Shares of Elon Musk’s SpaceX and Tesla extended their losses on Thursday, with the two companies on track to shed more than $380bn in combined market value this week as investors assess the impact of Democratic victories in the US midterm elections on their businesses.
Tesla shares fell more than 11 per cent on Thursday, while SpaceX dropped nearly nine per cent, extending declines from the previous trading session.
The sell-off follows Democratic victories in Texas, where the party secured the Senate, governorship and attorney general races on Tuesday.
Investors are concerned that the results could bring tougher regulatory scrutiny of Musk’s companies and slow the expansion of data centres, a sector that has become increasingly important to SpaceX’s business.
Musk had spent heavily backing Republican candidates in the midterm elections.
SpaceX, headquartered in Texas alongside Tesla, has expanded into artificial intelligence infrastructure, with more than half of its third-quarter revenue coming from renting out computing capacity, according to the report.
Goldman Sachs analysts estimated that Democratic gains at state and local levels could trigger short-term moratoriums on data centre construction, potentially affecting about 45 per cent of planned data centre capacity expansion in the United States.
Tesla also has exposure to the sector through its energy business, which supplies storage systems to data centre operators.
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The political outcome could further complicate Musk’s plans for a joint chip manufacturing project involving both companies.
In October, the billionaire announced Terafab, a proposed Tesla-SpaceX semiconductor manufacturing complex in Texas, with an estimated cost of up to $119bn.
Analysts also believe the election results could make a proposed merger between SpaceX and Tesla more difficult to complete, particularly because of potential regulatory hurdles.
Dan Ives, a partner and senior managing director at Yorkville Ives & Co, said the merger could face a tougher regulatory path in 2027 following the Democratic gains in Texas and Washington.
Musk disclosed during SpaceX’s third-quarter earnings call last month that special committees at both companies were examining a possible merger, describing the combination as a “good idea”.
The proposed deal has attracted investor attention as Musk increasingly aligns his businesses around artificial intelligence, energy infrastructure and advanced manufacturing.
About the Author
Cecilia Attah is a tech analyst with a degree from Benue State University. She covers tech news and startups at TechRegard with a focus on how technology is transforming Africa and shaping the global landscape.
