As Republicans suffered a landslide defeat and Texas elected its first Democratic governor in more than three decades, one of the biggest losers of the US midterms was not on the ballot: billionaire Elon Musk.
The world’s richest man spent nearly half a billion dollars to back Republican candidates, opens new tab and keep Texas red - a state home to his automaker Tesla, rocket-to-AI company SpaceX and a planned chipmaking venture between the two.
Those bets unraveled as Democrats seized both chambers of Congress and Gina Hinojosa defeated Greg Abbott in the Texas governor’s race, in a stinging rebuke to US President Donald Trump, a close Musk ally whom the billionaire helped elect.
Musk, who urged his followers on X to vote Republican as recently as Tuesday, now faces a resurgent Democratic Party that he has spent years antagonizing.
The GOP’s largest donor even threatened retaliation last month, opens new tab on his social media platform after a report said Democrats were considering probes into his companies if they won midterms.
Shares of SpaceX (SPCX.O), opens new tab fell 5.5 percent, while Tesla (TSLA.O), opens new tab was down 5.1 percent as both stocks lagged the broader market.
One of Musk’s biggest challenges could be slower approvals for the data centers crucial to tapping the $28.5 trillion addressable market that SpaceX touted to investors ahead of its IPO.
Analysts and experts expect Democrats to tighten scrutiny of data-center projects and push for construction moratoriums as local opposition grows over electricity costs.
“A Democratic sweep of Congress would put pressure on tech and potentially bring regulatory pressure on everything AI and possibly slow down the wild, wild west growth figures that we see daily and often take for granted,” said Jake Dollarhide, CEO of Longbow Asset Management.
“Musk was the Hail Mary for Republicans leading down to the wire. Unfortunately, his large infusion of cash to back red states could not overcome higher utility bills, prices at the grocery store and prices at the gas pump.”
Musk has also drawn scrutiny, opens new tab from Democratic lawmakers over restrictions on satellite communications used by Ukraine’s military, mass federal job cuts under his watch at DOGE and the government contracts and subsidies flowing to his companies.
One of the lawmakers is Robert Garcia, the next House Oversight Committee chair, who had a blunt two-word message for Republicans and their allies on Tuesday evening: “Lawyer up, opens new tab.”
Hinojosa pushes for data-centre moratorium
In Texas, Musk will have to navigate an already strained relationship with Hinojosa. He will also face newly elected US Senator James Talarico, against whom he spent heavily while backing Republican Ken Paxton.
Incoming governor Hinojosa had sued to obtain emails between Musk and Abbott and accused the former governor of selling out the Lone Star state by offering favorable deals to the billionaire.
She has also dismissed Abbott’s efforts to rein in data centers as political theater, calling instead for an immediate halt to new projects until lawmakers strengthened protections for local communities, as well as an end to tax breaks.
Musk himself appeared to make light of the hurdles. “Data centers in space looking pretty appealing right now,” he posted on X, opens new tab, alluding to SpaceX’s ambitious plan to put data centers in orbit despite major challenges around cooling and repairs.
The company’s AI business is centered around Colossus and Colossus II, two of the world’s largest AI data centers near Memphis. Renting their computing power to customers including Anthropic has sent revenue soaring and helped SpaceX post its first profit as a public company.
But the company aims to nearly double capacity, opens new tab from 1.7 gigawatts at September-end to as much as 3 gigawatts by year-end, before scaling up to 13 gigawatts next year.
Any delays in bringing the capacity online may hamper Musk’s ambitious revenue targets and intensify scrutiny from investors growing wary about AI infrastructure’s mounting costs.
Chip research firm SemiAnalysis has identified more than 9 gigawatts of planned or developing capacity, including new facilities at SpaceX’s Starbase complex in Boca Chica, Texas.
That Boca Chica expansion could face resistance as Hinojosa has opposed the potential sale, opens new tab of a beachfront state park to SpaceX after Texas Monthly reported officials had discussed the deal.
“Let me be clear: Texas is not for sale,” Hinojosa said last month. Musk, meanwhile, has deleted his election-day appeal to his followers to vote Republican.
