Elon Musk, the world’s richest man and a prominent MAGA supporter spent nearly half a billion dollars backing Republican candidates in the midterm elections, hoping to help the party retain control of Congress and keep Texas red.But US President Donald Trump‘s Republicans suffered a sweeping defeat. Democrats won control of both chambers of Congress, while Gina Hinojosa defeated Greg Abbott in the Texas governor’s race, ending more than three decades of Republican rule in the state.The results dealt a setback to Trump and Musk, one of his closest allies.Musk’s election spending was not his only setback. The results could also complicate his business plans, invite greater scrutiny of his companies and weigh on investor sentiment towards his businesses.The billionaire, who urged his followers on X to vote Republican as recently as Tuesday, now faces a resurgent Democratic Party that he has spent years antagonising.Last month, he threatened retaliation on his social media platform after a report said Democrats were considering investigations into his companies if they won the midterms.The sliding stocksMusk’s businesses came under pressure in the markets after the election results. Tesla shares fell 3.6%, while SpaceX shares dropped 3.2% in trading on Wednesday, underperforming the broader market.The decline came even as US stocks rallied after Republicans lost their hold over Washington. The S&P 500 rose 1.5%, the Dow Jones Industrial Average gained 1,325 points, or 2.6%, and the Nasdaq Composite climbed 1.7%, as of 11.15 am Eastern time.Musk is among the possible targets for investigations by a Democratic-controlled Congress. Democratic lawmakers have previously questioned restrictions on satellite communications used by Ukraine’s military, mass federal job cuts carried out under Musk’s leadership at the Department of Government Efficiency (DOGE), and the government contracts and subsidies received by his companies.Robert Garcia, who is set to become the next chair of the House Oversight Committee, had a blunt two-word message for Republicans and their allies on Tuesday evening: “Lawyer up.”Data-centre plans face fresh hurdlesOne of Musk’s biggest challenges could be securing approvals for the data centres needed to tap into the $28.5 trillion addressable market that SpaceX touted to investors ahead of its IPO.Analysts and industry experts expect Democrats to increase scrutiny of data-centre projects and push for construction moratoriums as local opposition grows over electricity costs.“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,” Jake Dollarhide, CEO of Longbow Asset Management, told Reuters.“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,” Dollarhide said.The potential restrictions could affect SpaceX’s ambitious expansion plans. Its AI business is centred on Colossus and Colossus II, two of the world’s largest AI data centres near Memphis. Renting out their computing power to customers, including Anthropic, has helped drive revenue growth and enabled SpaceX to post its first profit as a public company.The company aims to increase its data-centre capacity from 1.7 gigawatts at the end of September to as much as 3 gigawatts by the end of the year. It plans to scale this up to 13 gigawatts next year.Any delay in bringing the capacity online could affect Musk’s revenue targets and intensify investor concerns about the rising cost of AI infrastructure.Chip research firm SemiAnalysis has identified more than 9 gigawatts of planned or developing capacity, including new facilities at SpaceX’s Starbase complex in Boca Chica, Texas.Musk may also face challenges in Texas, where his relationship with incoming governor Gina Hinojosa is already strained.Hinojosa had sued to obtain emails between Musk and Abbott, accusing the outgoing governor of selling out the state by offering favourable deals to the billionaire.She has also dismissed Abbott’s efforts to rein in data centres as political theatre. Instead, she has called for an immediate halt to new projects until lawmakers strengthen protections for local communities, as well as an end to tax breaks for the industry.The proposed expansion at SpaceX’s Starbase complex in Boca Chica could also face resistance. Hinojosa has opposed the potential sale of a beachfront state park to SpaceX after Texas Monthly reported that officials had discussed the deal.“Let me be clear: Texas is not for sale,” Hinojosa said last month.Musk appeared to make light of the potential hurdles. “Data centers in space looking pretty appealing right now,” he posted on X, referring to SpaceX’s ambitious plan to place data centres in orbit. The proposal, however, faces major challenges, including cooling systems and repairs in space.Musk has since deleted his election-day appeal urging followers to vote Republican. The election results also triggered sharp movements across sectors, as investors assessed the possible impact of Democratic control on government spending, energy policy and technology regulation.Trump Media & Technology Group, the president’s social-media company, fell 13.7%. The stock had already lost 55.1% of its value this year amid a decline in Trump’s approval ratings. From a peak of $175 five years ago, it has fallen towards $5. Its main business is Truth Social, best known for Trump’s posts.Technology and AI-linked stocks also came under pressure. Nvidia fell 1.8%, making it the biggest drag on the S&P 500, while CoreWeave, which rents out access to AI chips through the cloud, dropped 8.6%.Advanced Micro Devices, however, gained 0.5% after reporting quarterly profits above analysts’ expectations.Investors expect Democratic victories to benefit renewable energy companies. First Solar rose 9.6%, while Enphase Energy gained 10.3%. Shares of major oil companies moved in the opposite direction, with ExxonMobil falling 3.5% and ConocoPhillips declining 4.4%.Defence stocks also fell amid expectations that a Democratic-led Congress could put pressure on Trump to scale back the war with Iran. Vice-President JD Vance blamed the conflict for the Republicans’ midterm losses. Lockheed Martin fell 6.4%, Northrop Grumman dropped 4.5% and General Dynamics declined 3%.In the bond market, the yield on the 10-year US Treasury fell to 4.92% from 4.95% late Tuesday. The decline could reflect expectations that divided political control will limit further increases in government spending and tax cuts that could widen the federal deficit.Treasury yields had risen through the summer, reaching their highest levels in decades amid concerns over government debt, inflation and other economic pressures.Global markets also rallied, with stocks rising 2.4% in Paris, 2.2% in Shanghai and 2% in London. Japan’s Nikkei 225 was an exception, falling 1.4%.Easing oil prices provided further support. Brent crude, the international benchmark, fell 4.4% to $99.03 a barrel amid uncertainty over the impact of the war with Iran on global energy supplies. Prices have fluctuated between roughly $70 and $120 a barrel since shortly before the conflict began.
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