Shares of Tesla Inc. and Space Exploration Technologies Corp. fell about 1.8% in postmarket trading on Tuesday as early midterm election results pointed toward a decisive win for Democrats. The sell-off followed an early call projecting that Senator Jon Ossoff would win reelection in Georgia, and later projections from Decision Desk HQ suggested the party would take control of both the US House and Senate.
For investors holding either stock, a so-called blue wave poses a double risk. It could fuel concerns about tighter regulation of artificial intelligence, and it could cast doubt on a potential merger of the electric vehicle maker and the rocket, AI and satellite company. First New York's Vikram Rai said that while Congress cannot single-handedly block a deal, empowered Democrats may be able to slow it down. "Both of these stocks have major headline risk if we get a blue sweep," Rai told Bloomberg.
Tesla shares have rallied 34% since their late-July low on investor optimism around AI products and the possible combination with SpaceX. SpaceX, which joined the ranks of the world's most valuable companies after its June initial public offering, earns billions of dollars from US government contracts. Its stock has largely traded sideways since the IPO, holding a $1.9 trillion market valuation.
Musk, who poured nearly $450 million into GOP coffers ahead of the midterms, has long been closely tied to President Donald Trump. Shares of his companies have reacted sharply to past election results, with Tesla surging more than 90% in the month after Trump's 2024 re-election before those gains unwound. Mark Hackett, chief strategist at Nationwide Funds Group, said that once elections pass, "fundamentals and reality take control."
Source: Bloomberg Markets · Summarized by HeadlinesBriefing