Wall Street experienced a historic moment the day after the Democrats’ midterm victory, with the Dow Jones up 3% on Wednesday, its best performance after a midterm in 44 years. But on Thursday it erased those gains, falling 2.9% as investors dumped AI-related stocks like AMD and Micron.
But for Elon Musk, who spent between $427.5 million and $483 million to support Republicans, the losses began the same day as the rally and then accelerated. Tesla shares fell 3.3% and SpaceX shares fell 3.8% at market close Wednesday, wiping tens of billions of dollars from Musk’s fortune as they also underperformed compared to the S&P 500’s 1.6% growth and stocks like Amazon and Apple, which jumped 6.1% and 5.3%, according to Fortune’s analysis. He lost $33.5 billion of his paper wealth that day, and another $79.7 billion in Thursday’s selloff, bringing his two-day loss to about $113 billion as of market close on Nov. 5, according to the Bloomberg Billionaires Index.
In short, in 48 hours, Tesla and SpaceX went from a combined market capitalization of around $3.5 trillion on Tuesday evening to $3.04 trillion on Thursday evening, erasing around $456 billion in total. As of Thursday evening, SpaceX’s market cap was $1.68 trillion, about 87% of what it was on midterm night, and Tesla’s market cap was $1.36 trillion, or about 86% of its value as of that date.
Investors fear the two companies and their founder could face increased scrutiny from the new Congress. Democrats have indicated they want to investigate Musk’s involvement in DOGE’s takedown of federal agencies and his potential conflicts of interest, since SpaceX has made billions from federal contracts. The new chairman of the House Oversight Committee, Rep. Robert Garcia, has pledged to investigate “corporate corruption,” and his spokesperson told Politico on Oct. 20 that Musk’s role in DOGE “is something we plan to investigate.”
“The nail that sticks out gets hammered first, and Musk has certainly stood out, especially in government, whether it’s donations, elections, and all the feathers he ruffled when he was at DOGE,” Keith Snyder, senior equity analyst at CFRA Research, told Fortune.
Scrutiny could extend to SpaceX’s satellite business, its most profitable segment. Sen. Richard Blumenthal of Connecticut sent a letter to Musk inquiring about SpaceX’s contracts with the Department of Defense and its ability to restrict Starlink after reports surfaced that the Ukrainian military had lost access to Starlink without notice.
But Snyder said the brief selloff in SpaceX and Tesla was due to a knee-jerk investor reaction to the election and an overestimation of the impact Democrats can have on businesses. After all, President Donald Trump still has veto power over any major AI restrictions he may pass, and he remains friendly toward Musk.
“Running AI was one of their stated goals, but we must remember that Trump still seems to support Musk and has veto power,” Snyder said.
To investors who are pinning their hopes on a SpaceX and Tesla merger and worried about Democratic interference in this area, Snyder said that with the Federal Communications Commission having a Republican majority, he does not expect major action in this area, except for Democrats to be able to “slow things down significantly.” Fortune reported that the merger math doesn’t add up for SpaceX shareholders.
“There are too many pieces already in place for Musk, for Tesla, for SpaceX that will allow him to continue without having to worry about any Democratic action,” he said.
Some analysts are taking a more bearish stance. Dan Ives wrote in a note Thursday that a merger with Tesla SpaceX “faces a much stricter regulatory roadmap” due to Texas going blue. This new political reality, enabled in part by voter anger at data centers, coincides with investors’ long-standing concerns that AI development is unsustainable. Snyder said anxiety could have contributed to SpaceX’s sale, but SpaceX has the advantage of having already innovated in data centers.
During the third-quarter earnings conference call ahead of the midterm elections, Musk expressed confidence that the company could bring 10 gigawatts of computing online by 2027, in addition to the 2.5 to 3 gigawatts SpaceX will have by the end of 2026, a total number that AI and semiconductor research firm SemiAnalysis has quantified as equivalent to SpaceX’s entire data center capacity. Google from 1999 to 2026 in just a year and a half.
“Even if they were able to achieve 25 to 50 percent of that goal, that would be incredible in terms of capacity building,” Snyder said.
He said where he sees more risk for SpaceX and for AI in general is if there is a Democratic victory in the White House in two years, because for now there will be political gridlock with a Republican president and a Democratic-controlled Congress.
“The fears of these AI companies are now real,” he said. “(The Democrats’) platform has made it clear that they want to master AI, and so, 27, 28 will be a stalemate, but then it becomes what happens in 29.”
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