Tesla and SpaceX fall sharply after Democrats win U.S. midterm elections

Market value drops over two sessions

Herald Business reports that Tesla and SpaceX together lost more than 500 trillion won, or about $373 billion, in market capitalization over two days after the Democratic Party won the U.S. midterm elections. The article says Tesla closed Thursday down 10.77% at $343.69 on the New York Stock Exchange, while SpaceX fell 9.05% to $123.62. Both companies had already declined on Wednesday, extending the slide into a second straight session. Over the two-day period, the combined value loss was estimated at about $456.7 billion, or roughly 619 trillion won.

Regulation worries and political reaction

According to the report, the selloff was driven mainly by fears that Democratic control of both chambers of Congress could bring tougher regulation of data centers. It also says sentiment was affected by Elon Musk’s support for Republican candidates. Musk was described as the largest single donor in the midterm races, with contributions of more than $470 million to Republican candidates and related groups.

Texas results and SpaceX’s AI plans

Herald Business says concern increased because Democrats won the Senate, governor, and attorney general races in Texas, where both Tesla and SpaceX are based. The article cites a Wednesday note from Deutsche Bank saying the future policy path was hard to forecast, while also warning that “SpaceX could face headwinds in this political environment.” The report adds that worries grew about SpaceX’s AI business, since data center rules have become a major political issue in Texas. It says SpaceX is expanding an AI computing capacity rental business that accounted for more than half of total sales in the third quarter. The company is also planning a facility in Grimes County, Texas, called Terafab, which would include a large data center and a semiconductor factory.

Merger uncertainty and analyst views

The article says uncertainty also deepened around a possible merger between Tesla and SpaceX, with concerns that Democrats could subject any deal to stricter regulatory review. Musk said on SpaceX’s earnings call on Oct. 20 that a merger was “a good idea,” and he said both companies had formed special committees to discuss it. Analysts are said to see a reverse triangular merger, in which SpaceX would absorb Tesla through a share exchange, as the most likely structure. Samsung Securities researcher Im Eun-young described a version in which SpaceX would create a wholly owned subsidiary that would absorb Tesla, leaving Tesla as a 100% subsidiary of SpaceX.

Different estimates on political and market risk

Herald Business quotes Yorkville Ives & Co. partner Dan Ives as saying he thinks the merger will happen, but that the new “blue” political situation in Washington and Texas has made approval much harder next year. Morningstar analyst Seth Goldstein said the chance of unfavorable legislation actually passing was low because President Donald Trump could veto bills through 2028. Even so, he said Democratic proposals and political messaging over the next two years could weigh on Tesla’s share price. The report also says that, as of Wednesday, South Korean investors held $22.1 billion in Tesla stock, the largest position among U.S. equities, and $3.1 billion in SpaceX shares.