SpaceX, Tesla tumble 9% as Democratic sweep muddies merger and AI buildout

SpaceX (SPCX) and Tesla (TSLA) each shed roughly 9% on Thursday, extending a slide that kicked off after Democrats captured both the House and Senate this week. Investors are pricing in a rougher regulatory path for two things Musk's empire cares about most: building data centers and, eventually, merging the two companies. Both are headquartered in Texas, which is suddenly Ground Zero for the selloff.

Texas flipped blue at the gubernatorial level, and Democrat James Talarico grabbed the state's Senate seat. Musk traded sharp social media barbs with Talarico during the run-up to the election, so the outcome lands personally as well as politically. The state's new shade of blue is the core of the market's anxiety, per Yahoo Finance.

Merger talk is back on the table — and now harder. Yorkville partner and managing director Dan Ives told clients Thursday he still expects a SpaceX/Tesla tie-up to happen, but he sees a much tougher regulatory roadmap to close a deal in 2027 under the new political map in Washington and Texas. Musk himself floated the idea on SpaceX's third quarter earnings call last month, saying a combination would be a good idea and confirming both companies were exploring one.

The AI buildout is the other pressure point. SpaceX has leaned harder into AI compute as a revenue stream, so any slowdown in data center construction hits it directly. Musk announced earlier this year that a Terafab — a sprawling semiconductor manufacturing complex in Texas meant to supply both SpaceX and Tesla — was coming.

Analysts are already running the numbers on what a blue wave means for construction. Goldman Sachs calculated Wednesday that Democratic wins at the state and local level will likely trigger short-term data center moratoria that could touch about 45% of planned US capacity expansion. Ives still sees Big Tech and hyperscaler capex clearing $1 trillion in 2027, but he expects the growth rate into 2028 to moderate significantly as the data center buildout decelerates because of the political landscape, Texas especially.

The near-term question for traders: whether SpaceX and Tesla keep bleeding while the new Congress settles in and Texas regulators signal how hard they'll push on data centers and big corporate combinations. For now, the market's answer is a sharp thumb down on both tickers.