Why Has The Democrats’ Victory In US Midterm Elections Rattled Elon Musk?
The most unexpected outcome of the US mid-term election was the ‘blue wave’ in the historically Republican home ground of Texas. However, it appears that this loss has affected tech billionaire Elon Musk the most. The SpaceX founder has spent roughly half a billion dollars supporting Republican candidates in Texas, where his companies are based.
With the state electing its first Democratic governor, Gina Hinojosa, SpaceX shares fell 5.5%, and Tesla shares tumbled 5.1%. The world’s richest man made his loyalties to the Republican Party clear years ago and has remained a close ally of President Donald Trump. He has antagonised Democrats and even threatened action against party members on his social media platform X after a report suggested investigations into his companies if their party were elected to power.
One of the biggest threats to Musk’s business empire comes from data centre opponents who have won big time in the midterms. The X-owner is one of AI technology’s biggest champions, and the blue wave in Congress is bound to slow down approvals for data centre construction, which are crucial for AI infrastructure.
Musk seeks to integrate AI with space research, and SpaceX estimated in April that its total addressable market (TAM) is $28.5 trillion. TAM is an important metric used to determine the maximum revenue a company could generate if it monopolises a particular market. SpaceX expects that the AI sector could generate $26.5 trillion, which is 90% of the market when integrated with space research and exploration.
Preparations are underway for the company to go public, targeting a valuation of $1.75 trillion and seeking to raise about $75 billion, which would be the largest IPO in history. Analysts are sceptical about whether SpaceX can reach these figures, given the midterm results, and because the SpaceX-acquired xAI posted an operating loss of $6.4 billion in 2025, sharply wider than the $1.6 billion loss a year earlier.
However, Starlink, SpaceX’s satellite internet business, recorded a favourable $4.4 billion in operating profit. Starlink is the space company’s biggest revenue generator, bringing home $11.4 billion of its $18.7 billion total revenue last year.
Political commentators have expressed that the Democrats’ victory will undoubtedly put a lot of pressure on tech companies and introduce many regulatory hurdles for AI development. They also said that despite Musk pouring in $446 million to back Republican candidates, he had no chance of succeeding in this election, as households are struggling with an unaffordability crisis.
The tech entrepreneur already has a fractured relationship with Hinojosa and the newly elected Senator James Talarico. Musk has spent significant amounts of money backing their opponents and Hinojosa has already sued to be granted access to emails exchanged between her opponent for governor, Greg Abbott, and Musk, accusing the former governor of offering favourable deals to the billionaire.
She has been vocal against data centre construction, calling for local communities to be protected and to end tax breaks for the ultra-wealthy. SpaceX’s AI business is centred around Colossus and Colossus II, two of the world's largest AI data centres near Memphis. The company rents out computing power to several companies, including Anthropic, pushing revenue to record heights. It is through this venture that SpaceX posted its first profit as a public company.
Musk aims to increase the data centre capacity from the current 1.7 gigawatts to 3 gigawatts by year-end and climb to 13 gigawatts next year. However, this change in leadership is likely to introduce new regulations which will hamper the company’s targets and timeline. More regulations will also shake investors’ confidence, especially as the rising costs of AI investments are already making financiers wary of taking such risks.
