Elon Musk's Tesla and SpaceX lose over $420 billion in combined market cap after midterms

Tesla and SpaceX shares fell about 9% and 11% Thursday afternoon, respectively, amid a broader tech selloff and investor concerns about potential Congressional probes and tighter regulation after Democrats won control of both chambers of Congress. Their combined market-cap losses exceeded $420 billion since Tuesday’s close. Deutsche Bank analysts warned that Texas rules on data-center development could delay SpaceX compute capacity and raise capex; scrutiny also could complicate a potential Tesla-SpaceX merger, while the article notes a separate records-preservation instruction concerning Starlink restrictions in Ukraine.

Analysis

The key risk is not political headlines per se but a higher hurdle rate and longer time-to-power for Texas compute projects. Permitting delays, tighter water and electricity conditions, or reduced incentives could defer capacity and raise build costs; that matters most to SpaceX’s planned compute footprint and the proposed Terafab, while Tesla’s core auto exposure is less direct. Any eventual rules may be narrowed, phased in, or avoid projects already in process, so do not capitalize a worst-case delay into all future earnings yet.

SpaceX also faces a separate, potentially more consequential channel: scrutiny of Starlink’s operational discretion in a conflict could affect government trust, procurement oversight, or contract terms. That risk is distinct from data-center regulation and could persist even if Texas permitting concerns fade. By contrast, Musk’s personal wealth decline is not itself a cash-flow shock to either company, though it can amplify volatility and raise questions around governance or any proposed combination.

Near term, the broad tech selloff makes attribution difficult; a further decline may reflect beta and positioning rather than new company-specific information. Over 1–3 months, watch legislative proposals, permitting timelines, and any agency or congressional action on Starlink. Over 6–18 months, the thesis turns on whether compute projects actually slip or require materially different infrastructure spending. Contrarian check: campaign positions do not equal enacted policy, and delays are not equivalent to cancellation. A broad tech rebound or preserved project approvals could reverse the relative-pressure case.

Key Decisions for Investors

• Prefer a conditional relative-value position over a fresh outright short: underweight SPCX versus a broad tech proxy such as QQQ, sized modestly and entered after the initial event-driven volatility settles. The thesis is company-specific regulatory and geopolitical overhang; the hedge reduces exposure to a general tech reversal. Reassess if Texas approvals proceed on schedule or Starlink scrutiny produces no procurement consequences.
• Keep TSLA exposure separate from SPCX. Do not treat the Terafab risk as a read-through to the entire Tesla business; trim only if project disclosures show a material schedule or cost change. A long-TSLA/short-SPCX pair is a watch item, not a base-case trade, until project ownership, funding, and exposure are clarified.
• For a defined-risk bearish expression in SPCX, consider a put spread only after confirming listed-option liquidity and spreads; avoid paying elevated event volatility immediately after a sharp move. Loss is capped at premium, while the payoff depends on concrete permitting or Starlink developments rather than election rhetoric alone.
• Track Texas legislative language and project-specific permit status, plus any formal congressional, defense, or agency action concerning Starlink. The thesis weakens if there are no material restrictions, delays, or contract implications; it strengthens if guidance, capex plans, or disclosed project timelines deteriorate.