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Shares in Elon Musk's SpaceX fell sharply for a second day on Thursday, closing below the price at which the company went public in June, as investors reacted to the Democrats' sweep of the midterm elections and the prospect of tougher regulation of artificial intelligence and data-centre building.
SpaceX, which trades on the Nasdaq under the ticker SPCX, closed at $123.62 on Thursday, down 9.05 percent on the day, after falling 3.81 percent on Wednesday. The two-day slide left the stock about 12.5 percent below its close of $141.31 on Tuesday, before the election results came in. Tesla, the other Musk-led company, fell 10.77 percent on Thursday to close at $343.69. Reuters reported that the two companies combined were on track to lose more than $380 billion in market value this week.
At the centre of the selloff is Texas, where both companies are headquartered. Democrats won control of both chambers of Congress and took the Texas governor's race, with governor-elect Gina Hinojosa campaigning for a moratorium on new data centres, an end to industry tax breaks and requirements for developers to cover the full cost of the electricity they use. Texas is projected to host about 41 percent of planned new United States data-centre capacity in 2028. Goldman Sachs analysts estimated this week that Democratic wins at the state and local level are likely to lead to short-term data-centre moratoria, potentially affecting about 45 percent of planned United States data-centre capacity expansion.
Musk spent nearly $450 million backing Republican candidates in the election cycle, including at least $45 million in support of Ken Paxton for the Texas Senate seat, which was won by Democrat James Talarico. The Democratic victory could also complicate a possible merger between SpaceX and Tesla, which Musk has been pursuing. "We will believe a SpaceX/Tesla merger happens but now faces a much tougher regulatory roadmap to get this deal done in 2027 given this new political blue roadmap in DC/Texas," said Dan Ives, partner and senior managing director at Yorkville Ives & Co. Lawmakers have also signalled plans to investigate aspects of Musk's activities, including his tenure as head of the Department of Government Efficiency, his companies' federal contracts and his role in the Russia-Ukraine war.
Thursday's fall came as the wider market also dropped, with the Nasdaq Composite down 5.5 percent and the S&P 500 down 4.4 percent. On Wednesday, by contrast, SpaceX and Tesla fell while the broader market rose, a sign that investors were repricing risk around Musk's companies specifically. Part of what is at stake is SpaceX's growing reliance on artificial intelligence: more than half of its third-quarter sales came from renting out computing capacity, with its AI division generating $7.56 billion of $14.6 billion in total sales.
The regulatory pressure is already concrete at Musk's artificial intelligence arm. Mississippi's Department of Environmental Quality has issued a notice to MZX Tech LLC, a subsidiary of the AI company now styled SpaceXAI, alleging that construction work at three data-centre sites in Southaven, Mississippi, began before the sites were covered by the state's Large Construction Stormwater General Permit. The department is seeking civil penalties of up to $25,000 a day, with preliminary claimed exposure of about $6.1 million across the three sites. The company said it is cooperating with the department and negotiating a resolution through a single agreed order. The three sites form part of the Colossus 2 complex near the Memphis-Southaven border, where the company is adding two more campuses and targeting 1.2 million GPUs. Permanent turbine permits exist for a larger plant of about 1.2 gigawatts, but the temporary turbine fleet remains the flashpoint, with phase-out targeted for 2027. Separately, a federal judge on October 30 denied the company's motion to dismiss the NAACP's Clean Air Act lawsuit over gas turbines at the Colossus site, so that case continues.
No new crackdown has been confirmed. But with Democrats now in control of Congress and in key statehouses, and with the Mississippi penalties still unresolved, investors are pricing in a much tougher political landscape for Musk's empire than the one it faced a week ago.