Markets rise, but SpaceX and Tesla stocks fall, after Dems take back the House and Senate. Here’s why

There’s no two ways about it: Yesterday’s midterm election results were nothing short of a massive victory for the Democrats (a “blue tsunami,” indeed). The Democrats will now control both chambers of Congress by a wide margin, radically altering the balance of power in Washington.

While change brings uncertainty—and no one likes uncertainty less than investors—stock markets have so far reacted positively to the news.

As of the time of this writing, S&P futures are up more than 1%, Dow futures are up more than 1.4%, and the tech-heavy Nasdaq futures are up nearly 1%.

But while many stocks are trending up this morning, two of the biggest ones, Elon Musk’s SpaceX (Nasdaq: SPCX) and Tesla (Nasdaq: TSLA), are down significantly in premarket trading.

And yes, the election results are likely the biggest reason for their fall. Here’s what you need to know.

Tesla and SpaceX shares fall after historic Democratic wins

As of the time of this writing, shares in Elon Musk’s two public companies, Tesla and SpaceX, are down by notable percentages.

TSLA shares are currently down around 5.5% in premarket trading, with SPCX shares down more than 5.5% as well. 

To put those numbers into perspective, the broader Nasdaq, where Tesla and SpaceX trade, is up nearly 1%.

And other Big Tech contemporaries of Musk’s public companies are also seeing green, including Alphabet, Amazon, Apple, Microsoft, Nvidia, and Meta.

So if most of Big Tech is up on the midterm results, why are Musk’s companies down significantly?

The short answer is that investors are likely worried that a Democratic-controlled Congress could make things harder for Musk’s companies going forward, mainly through extra scrutiny on Musk’s business empire and the companies’ existing government contracts.

Musk has spent much of the last several years making enemies of the Democrats as his political alliances shifted right.

During that time, Musk became one of the largest donors to the GOP and, in the midterm elections alone, contributed hundreds of millions to Republican coffers.

Musk also infamously ran the Trump administration’s Department of Government Efficiency (DOGE) in 2025, which cut funding for numerous programs important to Democrats. 

Without a doubt, Musk is the most high-profile critic of the Democrats, frequently lambasting them and the left in general on his social media platform X, while embracing the current administration, which has close ties and contracts with Musk’s various properties, including SpaceX and its Starlink satellite business.

But now the balance of power has shifted in Washington—not to mention Texas, where the Democrats won the governorship and Senate race, turning the state blue for the first time in decades, and where Elon Musk relocated his companies. Investors this morning clearly fear that shift now leaves Musk’s business interests vulnerable.

How could Tesla and SpaceX be impacted?

The main thing investors in SpaceX and Tesla seem to be fearing today is that the new Democratic-controlled House and Senate could increase scrutiny and regulatory oversight of Musk’s companies’ business dealings and government contracts.

This is especially true for a prospective merger between Tesla and SpaceX, which the boards of both companies are studying, Musk has confirmed.

As Kathleen Brooks, research director for brokerage firm XTB, told the Wall Street Journal, “While Congress cannot stop a merger between SpaceX and Tesla, they could slow it down via extra scrutiny.”

She added: “There is now a political risk premium attached to both Tesla and SpaceX that could weigh on their share prices.”

And in premarket trading today, that “political risk premium” does indeed seem to be in effect.

Currently, TSLA is trading at around $375.50, and SPCX is trading at around $133.

Of course, any increased scrutiny would not come immediately. Although the Democrats swept the midterm elections last night, the new Congress is not sworn in until January 3, giving Musk and his investors time to digest and better plan for the possible changes ahead.