Democratic win hits SpaceX and Tesla shares on AI regulation and merger risks

Shares of Elon Musk's SpaceX and Tesla fell in premarket trading Wednesday after a decisive Democratic victory raised the prospect of stricter AI regulation and cast doubt on a potential merger between the two companies. SpaceX dropped over 7.5% and Tesla over 5.5%, despite broader US stock futures rising more than 1%. Musk, who contributed about $474 million to Republican candidates, saw several backed candidates lose, including Ken Paxton in Texas and Vivek Ramaswamy in Ohio. Democratic governor-elect Gina Hinojosa has campaigned against corporate subsidies and datacenter incentives, potentially complicating Musk's expansion plans in Texas, where Tesla and SpaceX have major operations. Analysts noted Democratic control could lead to greater congressional scrutiny of Musk's federal contracts and AI ventures, while a merger between SpaceX and Tesla may face delays. Both stocks had risen over 20% in the past three months, adding to the political risk premium now weighing on their valuations.