Elon Musk’s SpaceX and Tesla Face Big Threat As Democrats Take Over Congress

With a Democratic majority in both chambers of Congress and a series of elections, including Texas, in which Democrats beat Republicans, Elon Musk’s business empire may be at increasing risk of political and regulatory trouble. The election outcome may make it harder for SpaceX and Tesla to expand plans, not just due to potentially a tighter budget. However, as lawmakers are set to review more closely the infrastructure for AI, government contracts and corporate subsidies.

Elon Musk’s SpaceX AI Data Center Expansion Faces Regulatory Hurdles

Elon Musk had spent almost half a billion dollars to help Republican candidates and maintain Republican control of Texas. But this efforts were not successful. Musk and US President Donald Trump had a significant political setback after Democrat Gina Hinojosa defeated Republican Greg Abbott in the Texas governor’s race.

The first worry for Musk is how Democrats might affect the growth of the AI infrastructure. SpaceX has big plans for its data center to expand its computing power.

Colossus and Colossus II are already in operation as two large data centers that are located close to Memphis. This is due to SpaceX being able to lease computing power to customers, including Anthropic, that helps its revenues.

But its growth projections may be delayed. Elon Musk’s company has reportedly plans to raise the capacity to as much as 3 gigawatts by the end of the year from the current 1.7 gigawatts at the end of September. It also has 13 gigawatts in sight for next year.

Chip maker SemiAnalysis counted over 9 gigawatts in current plans and development, and at SpaceX’s Starbase complex in Boca Chica, Texas.

Jake Dollarhide, CEO of Longbow Asset Management, said that if the Democrats sweep, it will make the tech industry more vulnerable to regulation.

“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,” he said.

Another hurdle might be local opposition. Hinojosa has been an opponent of a proposed sale of a state park on the beach to SpaceX. She has also urged for a temporary ban on new data centers projects until better safeguards for communities are put in place.

Tesla and Musk’s Other Businesses Face Greater Scrutiny

Elon Musk also may be subject to more political pressure as Democratic lawmakers scrutinize government involvement and business relationships between Musk’s firms.

Moreover, Musk has already been criticized by the federal government for layoffs in its organization, DOGE, and satellite communications limits imposed on the Ukrainian military and government contracts given to his companies.

The outcome of the election may provide Democrats with more power to look into these issues. In response to the loss, incoming House Oversight Committee Chair Robert Garcia sent a clear message: “Lawyer up.”

In the meantime, the stock market witnessed pressure on both of Musk’s companies after election. SpaceX stock drops 3.8% in pre-market trading, while Tesla drops 3.6% underperforming the market.

Elon Musk’s political contributions also came under fire from market experts. “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,” one expert said.