Democratic Midterm Wins Trigger Sharp Sell-Off in Musk-Linked Stocks

Key points

• Tesla stock fell more than 6% and SpaceX dropped 5.6% in premarket trading on Wednesday, November 4, 2026.
• SpaceX shares fell below $135, the price at which they were sold during their June public offering.
• The declines occurred despite a broader rally in tech stocks, including gains for Nvidia, Meta, and Google.
• Democrats won both houses of Congress and key state races, ending Republican control of the legislative branch.
• Musk spent nearly $500 million supporting Republican candidates in the midterm elections.
• A potential merger between SpaceX and Tesla may face regulatory hurdles under a Democratic-controlled Congress.

Background

In late October 2026, SpaceX and Tesla experienced a significant rally. SpaceX reported third-quarter revenue of $14.6 billion, a 161% year-over-year increase, and projected annual recurring revenue of $500 billion to $1 trillion by 2027. Elon Musk announced that boards of both companies were exploring a merger, describing it as a step toward a 'superintelligence singularity.' This optimism drove Musk’s net worth closer to $1 trillion, although analysts noted his wealth is tied to stock valuations rather than liquid cash. The current stock decline represents a sharp reversal from that bullish momentum, triggered by the political shift in Congress.

Why it matters

The stock declines highlight the increasing intersection of political power and corporate valuation for Elon Musk’s enterprises. A Democratic-controlled Congress may impose stricter regulatory scrutiny on Musk’s companies and complicate the proposed SpaceX-Tesla merger. This event underscores the volatility of Musk’s wealth, which is heavily dependent on market sentiment and political alignment, rather than stable cash flows. It also illustrates how major political shifts can disproportionately impact specific corporate leaders who have aligned their business interests with the previous administration.

What to watch

Investors will monitor whether the premarket declines persist during official trading hours on November 4. The proposed merger between SpaceX and Tesla may face legislative or regulatory obstacles as the new Democratic Congress begins its term. Lawmakers who have signaled intent to investigate Musk’s companies may initiate formal inquiries into his business practices and political spending. The broader tech market’s resilience, evidenced by gains in Nvidia and Meta, suggests that the decline may be specific to Musk-linked assets rather than a broad market correction.