SpaceX, Tesla extend losses as midterm results cloud data center, merger outlook

SpaceX, which has leaned into the AI data center boom, is headquartered in Texas alongside Tesla, where Democrats won the races for Senate, governor and attorney general on Tuesday. Musk had spent heavily to back Republicans in the midterms.

The selloff also reflects worries that Democratic gains could bring tougher scrutiny of Musk's businesses.

Combined, Musk's companies were on track to lose more than $380 billion in market capitalization this week. Tesla shares slumped over 11% on Thursday, while SpaceX shares slid nearly 9%.

Data centers have become a political flashpoint in the state. SpaceX has increasingly turned to AI computing as a revenue driver, with more than half of its third-quarter sales coming from renting out computing capacity.

Goldman Sachs analysts estimated this week that Democratic wins at the state and local level are likely to lead to short-term data center moratoria, potentially affecting about 45% of planned US data center capacity expansion.

Tesla is also tied to the buildout, with its energy unit pitching storage systems to data center operators.

In October, Musk announced plans for Terafab, a joint Tesla-SpaceX chip manufacturing complex in Texas that would cost up to $119 billion.

The midterm results could also complicate a potential merger of the two companies, analysts said.

"We will believe a SpaceX/Tesla merger happens but now faces a much tougher regulatory roadmap to get this deal done in 2027 given this new political blue roadmap in DC/Texas," said Dan Ives, partner and senior managing director at Yorkville Ives & Co.

Musk said on SpaceX's third-quarter earnings call last month that a merger with Tesla would be a "good idea" and that special committees at the two companies were exploring a potential deal.