Elon Musk faces a major storm after investing nearly $500 million supporting the Republican Party, as Democrats secured a majority in both houses of Congress and flipped Texas to blue for the first time in 30 years. This caused Tesla and SpaceX stocks to plunge sharply and may lead to intensified political scrutiny over AI data centers and autonomous vehicle projects.
The 2026 U.S. midterm election results, where Democrats won resoundingly by gaining majorities in both the House and Senate and importantly flipping Texas, are sending shockwaves through Elon Musk's business empire. Musk, one of the world's top billionaires, has been a major financial backer of the Republican Party.
Musk spent nearly $500 million (about 16 billion baht) supporting Republican candidates and tried to keep Texas as a Republican stronghold. However, the election results defied expectations as Democrats won both congressional chambers and Gina Hinojosa defeated Republican Governor Greg Abbott to become Texas governor.
This victory is seen as a severe political rebuke of President Donald Trump, a close ally of Musk, whom the billionaire had supported to enter the White House.
Musk, who recently urged his followers on platform X to vote Republican on election day, is now confronting the return to power of the Democrats, with whom he has long had conflicts.
Last month, Musk even threatened retaliation on social media after reports surfaced that Democrats might investigate his companies if they gained control of Congress.
Democrats Prepare to Investigate Musk's Businesses
One of Musk's key challenges will be increased legislative scrutiny regarding government contracts, subsidies, the operations of the Department of Government Efficiency (DOGE) he once oversaw, and restrictions on Starlink satellite communications affecting the Ukrainian military.
Robert Garcia, the incoming Democratic chair of the House Oversight and Reform Committee, sent a message to Republicans and their allies after Tuesday's election results, saying, “Get your lawyers ready,” signaling a tough stance on future political investigations.
Meanwhile, SpaceX shares fell 5.5% and Tesla shares dropped 5.1%, underperforming the broader market during this period.
Analysts believe the Democrats’ majority could increase pressure on tech businesses, particularly AI development and large data center projects, which face local opposition due to rising electricity costs and impacts on public utilities.
Jake Dollarhyde, CEO of Longbow Asset Management, said the Democratic sweep of both chambers might lead to stricter regulations on the tech industry and potentially slow the rapid growth of AI enterprises.
He noted that Musk was a key hope for Republicans in the final stretch of the election, but the massive financial support could not overcome public dissatisfaction with rising electricity, food, and fuel prices.
Texas Becomes Musk’s New Battleground
In Texas, Musk faces already tense relations with new Governor Gina Hinojosa, who has sued to access emails between Musk and Abbott and accused the former governor of selling out Texas’s interests to Musk through deals favoring his businesses.
Hinojosa also criticized Abbott's attempts to control data center projects as mere political posturing, calling for an immediate halt to new project approvals until the legislature enacts stronger protections for local communities, including ending tax incentives for these projects.
In response to these obstacles, Musk posted on X that “space data centers are looking more and more interesting,” alluding to SpaceX’s plan to locate data centers in orbit despite challenges related to cooling and maintenance.
Additionally, Musk faces James Talarico, a new U.S. senator from Texas who defeated Republican Ken Paxton, a candidate heavily supported by Musk financially.
Hinojosa also opposed the possible sale of Boca Chica beach park to SpaceX after reports surfaced of state officials discussing the matter. She declared, “Let me be clear, Texas is not for sale.”
SpaceX's AI Data Center Faces Potential Obstacles
SpaceX’s AI business is a rapidly growing revenue source, with the Colossus and Colossus II data centers near Memphis among the world’s largest AI data centers.
Providing processing power to clients, including the company Anthropic, has quickly increased SpaceX’s income and helped it achieve profitability as a public company for the first time.
However, SpaceX aims to increase processing capacity from 1.7 gigawatts as of late September to a maximum of 3 gigawatts by year-end, and expand to 13 gigawatts next year.
Chip research firm SemiAnalysis noted there are currently over 9 gigawatts of data center projects planned or under development, including new facilities in SpaceX’s Starbase area at Boca Chica, Texas.
Delays in project approvals could affect Musk’s ambitious revenue targets and heighten investor concerns over rising AI infrastructure costs.
Tesla May Face Stricter Autonomous Vehicle Scrutiny
The Democratic victory might also impact Tesla, especially concerning oversight of its Autopilot and Full Self-Driving (FSD) advanced driver-assistance systems.
The U.S. National Highway Traffic Safety Administration (NHTSA) has opened investigations into these systems, while Democratic legislators may increase pressure for tighter regulation of autonomous vehicle technologies.
Tesla’s Cybercab autonomous taxi project could face additional regulatory hurdles, particularly regarding fleet expansion and commercial operations, potentially affecting the company’s finances significantly.
However, the political changes are unlikely to directly affect vehicle production at Tesla’s Gigafactory Texas in Austin, as Senator Talarico has shown support for Tesla as a major manufacturer and employer in the state.
Tesla remains the leading electric vehicle maker in the U.S., with the Model Y among the best-selling models. Cox Automotive data shows over 262,491 Model Ys sold as of last October.
The Democratic Party has long supported clean vehicle production and carbon emission reductions, so Tesla’s passenger car manufacturing is unlikely to be directly impacted by this election outcome. However, the Cybercab project and autonomous vehicle business expansion may face stricter regulatory limits.
Musk May Not Escape Political Pressure
Musk moved Tesla’s headquarters from California to Texas in 2021, citing a more favorable regulatory environment and room for business expansion. SpaceX also relocated its headquarters to Texas in 2024.
Yet, the Democrats’ victories in Texas and nationwide may subject Musk to renewed regulatory pressures despite moving businesses out of more liberal states like California and Delaware.
Additionally, the election results may increase scrutiny over a potential Tesla-SpaceX merger, another issue closely watched by investors.
While Musk’s automotive and space businesses continue operations, this major political shift in the U.S. presents new challenges, including congressional oversight, state regulations, and local community pressures that could shape his business empire’s future growth.