space x and tesla Shares fell about 9% and 11%, respectively, on Thursday afternoon as investors worried that Elon Musk faces a new congressional investigation after the U.S. midterm elections and that his company could be subject to increased regulation.
The decline correlated with a broader decline in tech stocks, with SpaceX and Tesla totaling more than $420 billion in market capitalization losses since Tuesday’s close.
Mr. Musk’s wealth was more than $1 trillion after SpaceX’s initial public offering in June, but it is now less than $800 billion, according to Forbes, and has declined by about $90 billion in the past week. He is still the richest man in the world.
Musk was the biggest donor to Republican candidates and causes in the midterm elections, with more than $470 million in funding, the Financial Times first reported.
Even though Mr. Musk strengthened the Republican Party’s war chest, most of the candidates he supported lost their races.
Democrats gained majorities in both the House and Senate. And in Texas, where both Tesla and SpaceX are headquartered, Democratic Sen.-elect James Tallarico and Gov.-elect Gina Hinojosa defeated Musk’s longtime allies, Attorney General Ken Paxton and Gov. Greg Abbott.
“Policy is naturally difficult to predict, but we can imagine SpaceX facing further headwinds in this kind of backdrop,” Deutsche Bank analysts said in a note Wednesday.
Analysts said Governor-elect Hinojosa has “made data centers a major campaign issue,” calling for a “suspension of new licenses until the Legislature passes stronger protections for water use, electricity costs, zoning and incentives,” and criticizing tax breaks for large facilities.
Tesla and SpaceX are both building AI infrastructure in Texas, with plans to build a large-scale facility called TerraFab in Grimes County, Texas that will include a data center and a vast semiconductor factory.
SpaceX also plans to build a “supercomputer” at its Starbase, Texas, launch facility and corporate district, according to company job postings.
Deutsche Bank analysts also wrote that SpaceX’s Texas computing capacity may now be at risk of delays. Analysts wrote that the company may need to increase its capital spending to meet expected tightening regulatory requirements for data center expansion.
CNN first reported, citing an aide to the Democratic senator, that Musk and SpaceX have been instructed to preserve records regarding restrictions placed on the military version of Ukraine’s Starlink satellite internet service. This restriction hampered the country’s ability to defend itself from Russian attack.
Additionally, regulatory oversight could thwart the SpaceX-Tesla merger that Musk has been promoting, although he has acknowledged that it would first need shareholder approval.
SpaceX and Tesla had lost about $456 billion in market value by Thursday’s close.
–CNBC’s Nick Wells contributed reporting.
