- Musk’s companies took the first hit. Shares of Tesla and SpaceX both fell about 1.8% in postmarket trading on Tuesday after Senator Jon Ossoff was projected to win reelection in Georgia shortly after polls closed. Since then, Decision Desk HQ has projected that Democrats will take control of both the House and Senate.
- Investors face a double risk. A blue wave could bring tighter regulation of artificial intelligence and cast doubt on a potential merger of Tesla and SpaceX. Congress cannot kill a deal on its own, but an empowered Democratic majority may be able to slow it down, said First New York’s Vikram Rai, who warned that “both of these stocks have major headline risk if we get a blue sweep.”
- There is a lot of value at stake. Tesla shares have rallied 34% since their late-July low on optimism about AI products and the possible combination with SpaceX. SpaceX, which went public in June and earns billions from US government contracts, has largely traded sideways since its IPO and carries a $1.9 trillion market value.
- Musk is closely tied to Republicans. He poured nearly $450 million into GOP coffers before the midterms and used his 240 million X followers to campaign against Democrats. Bloomberg has reported that there is a push to announce a Tesla-SpaceX deal in the first half of next year so it can close while Trump is in office.
What Happened?
Tesla and SpaceX shares fell in after-hours trading as early midterm results pointed to a decisive Democratic win. Musk served as a White House adviser early last year and now co-leads a new Defense Department initiative. Before the vote, market watchers warned that Democratic control could boost the party’s ability to scrutinize Musk’s conduct and slow the expected tie-up. Musk’s businesses also sit at the center of several divisive issues, including the AI race and tensions over access to a military version of the Starlink satellite service involving the US, Ukraine and Russia.
Why It Matters?
Musk’s stocks have been highly sensitive to politics before. After Trump’s 2024 reelection, Tesla stock surged more than 90% in little more than a month, but those gains unwound as Musk’s relationship with Trump soured. The merger remains exploratory, both companies are spending billions of dollars on product development, and robotaxis, robots and Mars plans are still years from contributing to earnings. That leaves the shares heavily dependent on sentiment, which makes a hostile Congress a real risk for their valuations.
What’s Next?
The after-hours drop may prove temporary, since investors have often been reluctant to bet against Musk for long. Watch for any timeline on the Tesla-SpaceX deal and whether Democratic committee chairs move to hold hearings on Musk’s government roles or AI policy. Nationwide Funds Group chief strategist Mark Hackett said that once elections pass, “fundamentals and reality take control,” so Tesla’s next delivery and margin data will matter more than the vote.
Affected Tickers and Coins: TSLA
Source: Bloomberg
