Shares of Tesla and SpaceX experienced significant declines following the 2026 midterm elections, a period during which Elon Musk reportedly spent approximately $445 million to support Republican candidates. The drop in stock value for both companies occurred despite gains in other major tech stocks and the broader S&P 500 index.
Musk's substantial political expenditure, with a notable portion directed towards Texas races, has drawn scrutiny, particularly as Texas elected its first Democratic governor and senator in decades. The newly elected Texas leadership, including Governor Gina Hinojosa, has previously expressed criticism of Musk's business dealings and the preferential treatment his companies may receive, including public subsidies and land use plans.
Beyond the electoral outcome, a potential merger between Tesla and SpaceX, valued at around $3.5 trillion, faces increasing pressure. This proposed combination would require approval from state and federal regulators. The shift in Texas's political landscape, with Democrats now in key statewide positions, could present new regulatory challenges for Musk's ventures, which recently relocated their headquarters to the state.
Musk, who has been a major political donor in recent years, acknowledged the election results with a post on X, humorously referencing his efforts. Wall Street analysts have discussed scenarios for the potential all-stock merger, which could see SpaceX acquiring Tesla, but significant shareholder and regulatory hurdles remain.
Democratic lawmakers have also indicated a readiness to scrutinize Musk and his companies, suggesting a potentially challenging regulatory environment ahead for any proposed merger or ongoing business operations.