SpaceX and Tesla shares slide on US midterm data centre and merger fears

Shares of Elon Musk's SpaceX and Tesla slumped on Thursday, extending losses from the previous session, as investors worried that Democratic wins in the US midterm elections could slow data centre build-outs and complicate a potential merger of the two companies.

Shares of Elon Musk's companies SpaceX and Tesla slumped on Thursday, extending losses from the previous session, as investors worried that Democratic wins in the US midterm elections could slow data centre build-outs. Combined, Musk's companies were on track to lose more than US$380 billion in market capitalisation this week. Tesla shares slumped over 11 per cent on Thursday, while SpaceX shares slid nearly 9 per cent.

SpaceX, which has leaned into the AI data centre boom, is headquartered in Texas alongside Tesla, where Democrats won the races for Senate, governor and attorney general on Tuesday. Musk had spent heavily to back Republicans in the midterms. The selloff also reflects worries that Democratic gains could bring tougher scrutiny of Musk's businesses.

Data centres have become a political flashpoint in the state. SpaceX has increasingly turned to AI computing as a revenue driver, with more than half of its third-quarter sales coming from renting out computing capacity. 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 per cent of planned US data centre capacity expansion. Tesla is also tied to the buildout, with its energy unit pitching storage systems to data centre operators.

In October, Musk announced plans for Terafab, a joint Tesla-SpaceX chip manufacturing complex in Texas that would cost up to US$119 billion. The midterm results could also complicate a potential merger of the two companies, analysts said.

"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. Musk said on SpaceX's third-quarter earnings call last month that a merger with Tesla would be a "good idea" and that special committees at the two companies were exploring a potential deal.