Shares of Elon Musk’s companies, Tesla and SpaceX, fell following the Republican Party’s defeat in the US midterm elections. The Democratic Party secured majorities in both the House of Representatives and the Senate, putting pressure on Musk’s political investments and his companies’ expansion plans.SpaceX’s shares dropped 5.5 percent and Tesla’s shares declined 5.1 percent after the Democratic Party gained a majority in the US Congress, according to Reuters. Musk had spent approximately $500 million to support Republican candidates, making him one of the largest individual political donors in modern US history.In Texas, Democratic Governor Gina Hinojosa was elected, defeating incumbent Republican Governor Greg Abbott, who had held the position for over three decades. Additionally, Democratic candidate James Talarico defeated Republican candidate Ken Paxton, whom Musk had supported, in the Texas Senate race. Paxton conceded his defeat and congratulated Talarico.Governor-elect Hinojosa has called for an immediate halt to new data center construction and an end to tax exemptions for data centers until stronger regulations are in place to protect local community interests. SpaceX aims to increase its data center capacity from 1.7 gigawatts at the end of September 2026 to three gigawatts by the end of this year, and to 13 gigawatts next year. Reuters reported that delays in bringing new capacity online could affect the company’s revenue targets.With a Democratic majority in the US Congress, increased parliamentary scrutiny is anticipated over government contracts and grants awarded to Musk’s companies. SpaceX received $27.25 billion in federal prime contract obligations from fiscal year 2008 to 2026, with $3.58 billion received in fiscal year 2026 alone. NASA is SpaceX’s largest client, contributing $17.98 billion, or 66 percent of the total.Laws providing significant tax exemptions to attract data centers were implemented in Texas in 2014. Currently, 138 data centers across the state receive tax exemptions, leading to an estimated annual revenue loss of over $1 billion for the state. By 2027, sales tax exemptions for data centers are expected to reach $1.6 billion. Governor Hinojosa’s demand to halt data center expansion and end tax exemptions will directly impact the future plans of Musk’s companies.
Background
- Elon Musk contributed over $446 million to Republican-affiliated groups in the 2026 US midterm elections, making him the largest individual political donor in modern US history.
- The Texas Comptroller's office indicates that 138 data centers statewide benefit from tax exemptions, with five additional applications pending, accounting for an estimated $3.3 billion in lost tax revenue for the state.
- Former Texas Governor Greg Abbott, who previously supported data center development, later opposed construction in rural areas and called for the removal of their tax exemptions.
What happens next
Texas Governor-elect Gina Hinojosa's demands to halt new data center projects and end tax exemptions could significantly impact SpaceX's expansion plans. SpaceX aims to achieve 13 gigawatts of data center capacity by 2027 and deliver an operational prototype of a high-speed satellite communication network under the Space Data Network (SDN) backbone program by the end of 2027.
