Tesla Plunges 11% and SpaceX Falls 9% as Midterms Cloud Musk's Texas Plans

Tesla shares slumped more than 11% on Thursday, November 5, 2026, and SpaceX shares slid nearly 9%, as investors worried that Democratic wins in the U.S. midterm elections could slow data center build-outs in Texas and bring tougher scrutiny of Elon Musk's companies. Combined, the two companies were on track to lose more than $380 billion in market capitalization this week, according to Reuters.

What happened

The selloff extended losses from the previous session. Both Tesla and SpaceX are headquartered in Texas, where Democrats won the races for Senate, governor and attorney general on Tuesday. Musk had spent heavily to back Republicans in the midterms, Reuters reported, and other coverage put that spending at nearly half a billion dollars, including efforts in Texas.

CNN reported the same moves — Tesla down 11% and SpaceX down 9% — as the broader tech market plunged, with the Nasdaq Composite falling as much as 5.7% and dipping into correction territory. But Musk's companies fell harder than most large tech names, reflecting how directly their growth plans are now tied to Texas and to the AI data center boom.

Why Texas matters so much

SpaceX has leaned into the AI data center boom. More than half of its third-quarter sales came from renting out computing capacity, Reuters said. Tesla is tied to the buildout too, with its energy unit pitching storage systems to data center operators.

Texas has played a central role in accelerating AI investment, with Google, Meta, Oracle and OpenAI also making massive investments there. CNN reported that Texas Governor-elect Gina Hinojosa campaigned on a temporary data center moratorium and eliminating certain tax incentives for businesses building data centers in the state — a platform that directly threatens the pace of new projects.

Goldman Sachs analysts estimated this week that Democratic wins at the state and local level are likely to lead to short-term data center moratoria, potentially affecting about 45% of planned U.S. data center capacity expansion, according to Reuters.

Why it's blowing up

The stakes in Texas are unusually concrete for Musk. In October, he announced plans for Terafab, a joint Tesla-SpaceX chip manufacturing complex in Texas that would cost up to $119 billion. A slower permitting and incentive environment in the state would not just affect rented computing capacity — it could affect that flagship project as well.

The midterm results could also complicate a potential merger of the two companies, analysts said. 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.

"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., quoted by Reuters.

Key facts

Tesla fell more than 11% on Thursday; SpaceX slid nearly 9% — Reuters and CNN both reported those moves.
Combined, Musk's companies were on track to lose more than $380 billion in market value this week (Reuters).
Democrats won Texas races for Senate, governor and attorney general on Tuesday (Reuters).
Goldman Sachs estimated possible moratoria could affect about 45% of planned U.S. data center capacity expansion (Reuters).
SpaceX derived more than half of its third-quarter sales from renting out computing capacity (Reuters).

What's next

Investors will watch whether Texas officials move from campaign language to actual moratoria or incentive changes, and whether federal scrutiny of Musk's businesses increases. Not every analyst sees a lasting shock: some argue divided government could mean fewer sharp legislative changes overall. For now, the market is pricing the Texas risk first — and Tesla and SpaceX, as the two most Texas-centered names in the AI buildout, are taking the biggest hit. This report describes what happened and why markets reacted; it is not a recommendation to buy, sell or hold any security.

FAQ

How much did Tesla and SpaceX fall on November 5, 2026?

Tesla slumped more than 11% and SpaceX slid nearly 9% on Thursday, according to both Reuters and CNN.

Why did Musk's companies fall more than other tech stocks?

Both are headquartered in Texas and heavily tied to the AI data center buildout, and Democrats won key Texas races after campaigning on a temporary data center moratorium and fewer tax incentives.

How much market value could they lose this week?

Reuters reported the two companies combined were on track to lose more than $380 billion in market capitalization this week.

Could the election affect a Tesla-SpaceX merger?

Analysts cited by Reuters said the results could complicate a potential merger, with Dan Ives saying it now faces a much tougher regulatory roadmap for 2027.