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Elon Musk was not a candidate in Tuesday’s US midterm elections, but is being viewed as one of the biggest losers after the Democrats’ victories. The results have dealt a blow to his political influence and could expose his business empire to closer scrutiny.
The billionaire’s major spending on Republican candidates failed to prevent Democratic victories, AnewZ reported. Musk’s companies could face tighter oversight in Washington and Texas.
The world’s richest person spent about half a billion dollars supporting Republicans. Those efforts included seeking to keep Texas under Republican control. The state is home to electric vehicle maker “Tesla,” aerospace and artificial intelligence company “SpaceX,” and a planned joint chip manufacturing project.
The election strategy failed: Democrats took control of both chambers of Congress, while Gina Hinojosa defeated Republican Governor Greg Abbott in Texas, becoming the state’s first Democratic governor in more than 30 years.
The results also dealt a major blow to US President Donald Trump, Musk’s close political ally. The billionaire had helped finance Trump’s election campaign.
Markets fall after Democratic victories
Investors reacted quickly to the election results: “SpaceX” shares fell 5.5%, while “Tesla” shares dropped 5.1%. Both companies underperformed the broader market.
On election day, Musk also urged his followers on the “X” platform to vote Republican, but later deleted the post.
Democrats prepare to scrutinize Musk’s businesses
Now the Republican Party’s largest donor could face increased pressure from Democrats. Musk has long been in open conflict with Democratic lawmakers.
Last month, Musk threatened retaliation on “X” after reports that Democrats were considering investigating his companies if they took control of Congress.
Democratic lawmakers have already examined several aspects of his business and political activities. These include restrictions on satellite communications used by Ukraine’s military, widespread federal job cuts during Musk’s leadership of DOGE, and government contracts and subsidies awarded to his companies.
Robert Garcia, who is expected to chair the House Oversight Committee, issued a brief warning to Republicans and their allies on Tuesday evening: “Hire a lawyer.”
AI infrastructure expansion faces political risks
One of the main threats to Musk’s business plans is the rapid expansion of artificial intelligence infrastructure.
“Colossus” and “Colossus II,” near Memphis, are at the core of “SpaceX’s” AI business. They are among the world’s largest AI data centers.
The company rents computing capacity to customers, including “Anthropic.” This has helped drive rapid revenue growth and enabled “SpaceX” to become profitable for the first time as a public company.
Preparing for a stock market listing, “SpaceX” has told investors it is targeting a potential $28.5 trillion market. Seizing that opportunity will require a substantial expansion of data center capacity.
The company plans to increase capacity from 1.7 gigawatts at the end of September to 3 gigawatts by the end of this year, and to 13 gigawatts next year.
Chip research firm “SemiAnalysis” has identified more than 9 gigawatts of additional capacity that is planned or under construction. This includes facilities proposed for “SpaceX’s” Starbase complex in the Boca Chica area of Texas.
But these plans could face growing political opposition. Analysts expect Democrats to increase scrutiny of data center projects and seek construction moratoriums as residents’ protests over rising electricity bills intensify.
Delays to the projects could undermine Musk’s revenue targets and deepen investor concerns about the rapidly rising costs of AI infrastructure.
Jake Dollarhide, chief executive of “Longbow Asset Management,” said: “A Democratic sweep of Congress could put pressure on the technology sector, prompt regulatory pressure across every area related to AI, and slow the unchecked rapid growth we see every day and often take for granted.”
Dollarhide also described Musk as “the Republicans’ last hope” in the final stretch of the election campaign.
“Unfortunately, the large sums he allocated to support Republican states could not outweigh rising prices for utilities, food and fuel,” he said.
Texas election adds to Musk’s challenges
The political consequences are not limited to Washington. In Texas, Musk will face a Democratic governor with whom he has clashed before.
Hinojosa had previously sought court access to correspondence between Musk and Abbott, accusing the outgoing governor of offering the billionaire favorable deals at the state’s expense.
She has called Abbott’s efforts to limit data center development political theater. Hinojosa has called for an immediate pause on new projects until stronger protections are in place for local communities, as well as an end to tax incentives for such projects.
Those proposals could directly affect “SpaceX’s” planned expansion in Boca Chica.
After “Texas Monthly” reported that officials were discussing a possible sale of a coastal state park to “SpaceX,” Hinojosa publicly opposed the idea.
“Let me be clear: Texas is not for sale,” she said last month.
Another political opponent of Musk is newly elected US Senator James Talarico. His Republican opponent, Ken Paxton, received substantial financial support from the billionaire.
Musk floats idea of data centers in space
Despite the setbacks, Musk has appeared unconcerned about the possibility of tighter regulation.
“Data centers in space are looking quite compelling right now,” he wrote on “X.”
The comment points to “SpaceX’s” ambitious plan to put data centers into orbit. The concept faces significant challenges, particularly involving cooling systems and maintenance.
As Democrats prepare to take control of Congress and Hinojosa is set to become Texas governor in January, Musk may face a difficult political and regulatory environment. Whether the new leadership launches investigations or restricts data center expansion could determine the real cost of his failed election strategy.
