Space stocks fall as Democratic election gains raise scrutiny of Musk businesses

Market reaction after the election

BigGo Finance reports that shares across the space sector fell sharply in overnight trading after Democratic gains in Tuesday’s U.S. midterm elections raised the chance of closer congressional scrutiny of Elon Musk’s business interests. Investors focused especially on the proposed Tesla-SpaceX combination as the most exposed part of the story. SpaceX (SPCX) fell about 6% and Tesla (TSLA) fell about 5% after the close, according to TipRanks. The selling also spread to AST SpaceMobile (ASTS), Rocket Lab (RKLB), Planet Labs (PL), Redwire (RDW) and Intuitive Machines (LUNR), which each lost between 2% and 6%, according to Stocktwits. Broader markets were also weaker, with Nasdaq futures down 0.4%, S&P 500 futures down 0.3% and Dow futures off 0.1% before Wednesday’s session.

What Democratic control could mean

The report says Democrats are projected to take the House and have already secured the Senate, which would give them committee control and subpoena power. BigGo Finance says that has shifted the outlook for companies linked to Musk, who spent an estimated $446 million to $474 million during the 2026 cycle, mainly supporting Republican-aligned groups. The article says the key issue for traders is not whether Congress can formally block a Tesla-SpaceX deal, but how much it can slow it. Alexandra Merz, chief executive of L&F Investor Services, said on X that Congress cannot simply veto a private merger and that this alone would not remove the deal from consideration.

Merger process, scrutiny and government contracts

According to the report, Merz said the main hurdles would be shareholder approval, special-committee reviews and regulatory examination. She also said investors should watch committee progress, possible disclosures before Tesla’s Dec. 3 annual meeting and the formal deal terms. BigGo Finance says both Tesla and SpaceX have formed committees to evaluate a possible combination, but discussions are still at an early review stage. The article adds that Musk’s ties to President Donald Trump and his former role leading the Department of Government Efficiency have made him a focus for lawmakers. It says Senator Richard Blumenthal has already sought scrutiny of SpaceX’s Starlink and Starshield operations, including questions about military communications limits involving Ukraine and the Pentagon’s reliance on Musk-controlled technology. The report says Democratic control would not automatically cancel existing federal agreements, but longer investigations could affect future spending and contract awards.

Federal revenue, valuation debates and investor views

BigGo Finance says the leverage in the situation is mainly federal money. It cites a Trefis analysis published Nov. 2, based on SpaceX’s IPO filing, that estimated the U.S. government accounted for 20.9% of 2025 revenue, or about $3.9 billion of $18.7 billion in sales, with Starlink making up most of that amount. The report also notes that Democrats could slow missile-defense funding while restoring NASA funding that the White House proposed cutting. It says SpaceX has become the Pentagon’s default supplier quickly and launches most military payloads, which limits how easily Congress can redirect contracts. The article says the election also sharpened an existing debate over valuation. Investor George Noble urged more bearish bets on X and said Elon Musk was “the biggest loser” in the election night results, while also disclosing short positions entered at $485 for Tesla and $145 for SpaceX. Grant Cardone, founder and chief executive of Cardone Capital, tied the risk to Texas politics and said a Democratic win in that race would not be good for SpaceX or its artificial-intelligence plans. BigGo Finance says Democrat James Talarico defeated Republican Ken Paxton, ending Texas’s statewide Democratic losing streak that dated to 1994. On the other side, Morgan Stanley issued a bullish view, saying SpaceX traded at 17.6 times estimated 2028 earnings using a $140 reference share price and projected adjusted earnings of $109 billion, slightly below the S&P 500’s estimated 17.7 times multiple. The firm also nearly doubled its 2027 revenue forecast to $175 billion, raised its 2028 revenue and operating-income estimates to $289 billion and $119 billion, and moved its forecast for positive free cash flow to 2031 from 2035. It also cut projected borrowing through 2031 to $390 billion from $670 billion through 2035, though BigGo Finance notes those periods are not the same.

Wider risks, Starlink and whether the selloff lasts

The article says the political risk goes beyond the merger. It reports that Tesla still faces questions about autonomous-driving safety standards and regulation of its planned robotaxi service, while lawmakers may also look at possible conflicts between Musk’s government ties and his businesses. BigGo Finance says opposition to AI data-center construction, driven by concerns about electricity prices, water use and infrastructure costs, has been growing at the local level and could slow the buildout of computing capacity tied to SpaceX’s AI work. It also says local permitting authorities still have meaningful influence and that Trump’s veto power limits what a Democratic Congress can pass outright. For the broader space industry, the report says exposure to Musk varies: AST SpaceMobile buys launch services from SpaceX while competing in satellite mobile connectivity, and Rocket Lab competes for launch contracts while also supplying spacecraft and components to government clients. The article adds that Starlink faces its own regulatory path. On Oct. 8, SpaceX agreed to buy up to 14 MHz of paired 800 MHz spectrum from Grain Management, a deal that still needs FCC approval. Senators confirm FCC commissioners and oversee the agency’s budget. The report also says KDDI signed Asia’s first Starlink Mobile V2 contract on Aug. 10, aiming for high-speed data and VoLTE voice calls by the end of 2027, after already using Starlink backhaul on its au network since December 2022 and launching the au Starlink Direct phone service in April 2025. Tim Farrar, a satellite communications and spectrum consultant, questioned on X whether Musk or SpaceX would announce a new business deal to shift attention away from politics, after he had speculated that SpaceX could pursue EchoStar’s remaining business through a share-based deal involving wireless assets and spectrum. BigGo Finance says SpaceX has carried a valuation of roughly $1.9 trillion since its IPO in June, and Tesla shares had risen about 34% from a late-July low before the election-related pullback. Mark Hackett of Nationwide Funds Group said election narratives can matter before the vote, but fundamentals and reality take over afterward. The article ends by saying it is unclear whether the selloff will last and that the answer may depend on what the newly empowered committees investigate first.