Musk's $470 million political bet: Why Tesla, SpaceX's Texas expansion faces a regulatory test after US midterms

It seems Elon Musk's political bet on Republican candidates, especially in Texas, in the US midterm elections has failed to deliver the outcome he may have hoped for. The shares of his companies have tumbled spectacularly in the last two trading sessions, losing $456 billion since Tuesday's close.

With Democrats flipping several Republican held seats to take control of both chambers of Congress and winning the governor race in Texas, investors are increasingly concerned that Tesla and SpaceX could face tougher regulatory scrutiny, particularly over their ambitious artificial intelligence (AI) and data-centre expansion plans in the state, according to a report by CNBC.

Tesla shares fell more than 11% on Thursday, while SpaceX shares declined nearly 9%. By the end of the session, the combined market capitalisation losses for the two companies had reached about $456 billion since Tuesday's close.

Quick answers to key questions

•5 QUESTIONS

1

Why could the Texas midterm results affect Tesla and SpaceX’s expansion plans?⌵

Democratic victories in Texas have raised investor concerns about tougher oversight of data centres and AI infrastructure. New rules could delay projects or increase their costs.

2

What AI infrastructure projects are Tesla and SpaceX planning in Texas?⌵

Tesla and SpaceX have announced Terafab, a proposed chip-manufacturing complex in Grimes County that would include a data centre and semiconductor factory. SpaceX is also planning a supercomputer at its Starbase facility.

3

What concerns about data centres could lead to tighter rules in Texas?⌵

The election debate included data centres’ water use, electricity costs, local control and tax incentives. Governor-elect Gina Hinojosa called for a pause on new approvals until stronger protections are introduced.

4

Could tougher regulation in Texas affect a Tesla–SpaceX merger?⌵

It could. The article says increased regulatory scrutiny may make a potential merger more difficult, although special committees at both companies were exploring a deal.

5

Why did Tesla and SpaceX shares fall after the midterm elections?⌵

Investors were concerned that the election results could bring tougher scrutiny of the companies’ Texas AI and data-centre plans. Tesla shares fell more than 11% and SpaceX shares nearly 9% on Thursday.

The world's richest man was the biggest donor to Republican candidates during the midterm elections, contributing more than $470 million, the Financial Times reported.

However, most of the candidates he backed lost their races as Democrats secured control of both the House of Representatives and the Senate.

The results were particularly important in Texas, where both Tesla and SpaceX are headquartered. Democratic candidates James Talarico and Gina Hinojosa won the Senate and governor's races, respectively, defeating Republican candidates and longtime Musk allies Ken Paxton and Greg Abbott.

The outcome in Texas, once a deep red state, has raised concerns among investors about the possibility of a more challenging regulatory environment for Musk's companies, especially as they expand their AI infrastructure in the state.

Data-centre development has emerged as a political flashpoint in Texas, with concerns around water consumption, electricity costs, local control and tax incentives becoming part of the election debate.

Both Tesla and SpaceX are investing in AI infrastructure in Texas. Musk has announced plans for Terafab, a massive joint chip-manufacturing complex involving the two companies in Grimes County. The facility is expected to include a data centre and a large semiconductor factory, with a Reuters report putting the cost at $119 billion.

SpaceX is also planning to build a supercomputer at its Starbase launch facility and company town in Texas.

These projects could face delays or higher costs if the state introduces tighter rules governing data-centre construction and operations.

The election outcome could also complicate a potential merger between SpaceX and Tesla, another prospect that has attracted investor attention.

Musk has previously described a merger between the two companies as a good idea. He said on SpaceX's third-quarter earnings call last month that special committees at both companies were exploring a potential deal.

However, the possibility of increased regulatory scrutiny could make such a transaction more difficult.

CNBC reported that tighter oversight could affect the prospects of a merger.

Expectations around a possible SpaceX-Tesla merger had been a major positive factor for investors this year, but concerns over the political implications of the election quickly overshadowed optimism around the companies.

Gina Hinojosa, the governor-elect, made data centres a major campaign issue. She had called for a moratorium on new approvals until the state legislature introduces stronger protections on water use, electricity costs, local control and incentives. She had also criticised tax breaks for large facilities.

Gina on Thursday said ​that the state will introduce laws to protect its residents with regards to ‌data centers, citing their impact on rural communities, according to Reuters.

"Data centers have moved ​into mostly rural communities, and there are no rules and laws to protect Texans," said the ​Democrat.

Prabhakar Jha is a journalist and digital news editor with nearly a decade of experience in online media, specialising in breaking news, politics, national affairs. Having built his career across fast-paced digital newsrooms, he has developed a reputation for delivering accurate, timely, and reader-friendly stories while leading editorial teams during high-pressure news cycles. In 2026, he joined LiveMint as a Digital Content Producer. <br><br> A postgraduate in History from the University of Delhi, Prabhakar combines strong editorial judgment with a keen interest in public policy, governance, economics, and global affairs. Before joining LiveMint, he worked with leading digital publications, including News9Live and The Times of India, where he handled breaking news, copy editing, headline writing, live coverage, and newsroom coordination. <br><br> Beyond the newsroom, Prabhakar is passionate about long-form writing and storytelling. He has a particular interest in global affairs. An avid reader with a love for literary fiction, he also enjoys blogging, poetry, and working on creative writing projects.

Catch all the Business News , Corporate news , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.

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