Musk's $474M Midterm Bet Backfires as Democrats Sweep Texas and Congress

Key points

• Musk spent over $474 million on the midterms, with $224 million directed specifically to Texas races, making him the largest single donor of the cycle.
• Democrats won both houses of Congress and captured every statewide office in Texas, defeating Republican candidates Ken Paxton and Greg Abbott despite Musk’s heavy spending.
• Tesla and SpaceX shares fell in premarket trading, with SpaceX dropping below its June IPO price, while broader tech stocks rallied.
• Musk deleted a Tuesday post urging users to 'Vote red' after the results became clear, later joking about his failed 'space lasers' strategy.
• Democratic lawmakers have signaled intent to investigate Musk’s federal contracts, his DOGE tenure, and his foreign dealings, including Starlink restrictions affecting Ukraine.

Background

Prior to the election, Republicans were already struggling in traditionally red states like Texas and Ohio due to low approval ratings for President Trump and high inflation concerns. Musk had previously promised to spend less on politics but ultimately became the biggest known donor in the 2026 cycle. Local tensions over AI infrastructure, such as data center moratoriums in Memphis, highlighted growing public backlash against tech expansion.

How outlets are covering it

Business Insider highlighted the symbolic nature of Musk deleting his 'Vote red' post and his subsequent jokes about failed 'space lasers,' framing the loss as a personal embarrassment. The New York Times focused on the financial fallout, noting that SpaceX and Tesla stocks fell while the broader market rallied, and emphasized the potential complications for a proposed SpaceX-Tesla merger under a Democratic Congress. CNBC analyzed the campaign finance data, noting that 93% of Musk’s spending went to races Republicans lost, and highlighted the broader backlash against AI data centers, with voters approving bans in multiple communities. NPR focused on the legal and ethical scrutiny Musk faces, citing former ethics lawyer Richard Painter’s warning that Musk’s DOGE role may have violated conflict-of-interest laws, and detailing specific allegations regarding his foreign dealings and government contracts.

Why it matters

The election results signal a significant shift in political power that could directly impact Musk’s business empire. Democratic control of Congress may lead to investigations into his federal contracts and a potential slowdown in government funding for SpaceX. In Texas, the new Democratic governor, Gina Hinojosa, has called for a moratorium on data centers and an end to industry tax breaks, which could complicate Musk’s expansion plans for Tesla, SpaceX, and AI infrastructure. The outcome also reflects a broader national backlash against billionaire influence in politics and the rapid expansion of AI data centers, with voters approving restrictions in multiple localities.

What to watch

Democratic lawmakers are expected to launch investigations into Musk’s government contracts and his role in the Department of Government Efficiency. In Texas, Governor-elect Gina Hinojosa will likely push for stricter regulations on data centers and corporate subsidies, though her ability to enact major changes may be limited by the Republican-controlled state legislature. Investors will monitor the long-term impact of the stock declines on Tesla and SpaceX, particularly regarding the proposed merger and future government contract awards.