Tesla and SpaceX Shares Slide After Musk-Backed Candidates Lose in Texas

Shares of Tesla and SpaceX fell on Wednesday after Democrats won major races in Texas and across the country, according to CNBC, Bloomberg and MarketWatch.

The move

Both stocks declined roughly 4 to 6 percent during the trading session, according to those reports, even as the broader market rallied. The Dow Jones Industrial Average gained more than 1,000 points on the day.

The Texas connection

Tesla’s headquarters and its largest US vehicle factory are near Austin. SpaceX operates its Starbase launch and manufacturing site in South Texas. Both companies depend on state decisions about electricity, water, permits and incentives.

On Tuesday, Democrat Gina Hinojosa defeated Republican Gov. Greg Abbott, and Democrat James Talarico defeated Republican Ken Paxton in the US Senate race, according to the Associated Press. Elon Musk, who leads both companies, spent about $224 million in Texas this cycle, much of it supporting Republicans, according to a CNBC analysis of campaign finance data.

What investors are weighing

Hinojosa has called for a pause on new data center projects and an end to some corporate tax breaks. Musk’s companies have announced plans for large computing facilities. However, Republicans still control the Texas Legislature, which will limit how many of Hinojosa’s proposals can become law.

Nationally, Democratic control of Congress opens the door to investigations of federal contracts. SpaceX holds billions of dollars in contracts with NASA and the Defense Department. Democrats have also criticized Musk’s past role leading the Department of Government Efficiency.

Some caution

Analysts quoted by MarketWatch noted that both companies’ long-term values depend far more on vehicle sales, launch demand, satellite internet growth and new products than on any single election.

Tesla stock has been volatile throughout the year, often moving several percent in a day on news about sales, autonomous driving programs or Musk himself.

Musk’s response

Musk had not issued a formal statement on the results as of Wednesday afternoon. He has said in the past that he planned to reduce his political spending, though records show he spent at least $474 million on this year’s elections, according to CNBC.

Investors will look for more clues when Tesla reports deliveries and when the companies next update guidance.

Sources: Associated Press, CNBC, Bloomberg.