SpaceX appeared to be enjoying a strong run after reporting an impressive third quarter, with revenue rising 161% and net income more than doubling Wall Street expectations, according to the firm’s Q3 8-K earnings release.
But the momentum quickly faded as Democrats secured control of both chambers of Congress in the 2026 midterm elections, triggering a sharp investor reaction.
Between election night and Nov. 5, 2026, SpaceX and Tesla lost approximately $456 billion in combined market value. SpaceX shares fell 12.5% in two sessions, CNBC reported, dropping below its June 2026 IPO price of $135.
However, the sell-off may reflect more than a temporary market reaction. It also highlights growing political and regulatory challenges that could affect SpaceX’s long-term ambitions.
Also read: Elon Musk sends a strong memo to SpaceX and Tesla stock investors
How the Democratic win pushed SpaceX shares below IPO price
SpaceX’s market capitalization fell to about $1.68 trillion by the close on Nov. 5, 2026, roughly 87% of its pre-election value, Fortune reported.
Musk spent $446 million on Republican candidates during the cycle, yet key allies lost Texas governor and Senate races to Democrats, the Washington Post confirmed.
Deutsche Bank warned of “incremental headwinds” for SpaceX as investors sold Musk-linked stocks, even while the S&P 500 gained 1.6% that session, CNBC reported.
Keith Snyder, senior equity analyst at CFRA Research, told Fortune the sell-off was a knee-jerk reaction to the midterm results. He added that Musk’s heavy political involvement has introduced a form of reputational exposure his companies didn’t have before the election.
<strong>The nail that sticks out gets hammered first, and Musk has certainly stuck out, especially in government, whether it be donations, the election, and any of the feathers he ruffled while he was at DOGE</strong>.
That exposure could grow as SpaceX expands beyond its traditional aerospace and satellite businesses into artificial intelligence.
SpaceX’s growing AI business creates new regulatory risks
SpaceX’s risk profile has changed since its June 2026 debut because artificial intelligence now generates most of the company’s revenue and drives its capital spending.
The Super Intelligence (SI) division produced $7.56 billion in third-quarter revenue, roughly 52% of the $14.57 billion total, SpaceX disclosed.
That concentration means any policy restricting data center construction cuts directly into SpaceX’s primary business rather than a secondary line of business.
Capital spending reached $19.6 billion in the third quarter, with management projecting even higher outlays for the fourth quarter.
More SpaceX:
- Goldman Sachs revamps SpaceX stock estimates before crucial earnings test
- Musk called Anthropic ‘evil’; SpaceX’s deal with it nearly doubled
- Morgan Stanley doubles down on SpaceX stock verdict for investors
SpaceX’s acquisitions of xAI in February 2026 and the AI coding platform Cursor in August 2026 cemented the company’s position as one of the world’s largest AI operators. Cursor alone contributed $608 million in revenue during the quarter, showing how quickly SpaceX is converting AI acquisitions into earnings.
Connectivity remained the most profitable segment, generating $5.25 billion in third-quarter revenue with $2.37 billion in operating income. The division’s steady profitability gives SpaceX a revenue floor that supports its aggressive spending on both AI infrastructure and Starship development.
Tesla merger and data center expansion face mounting political pressure
JPMorgan called a Tesla-SpaceX merger “strategically coherent on paper” but flagged a “practical bottleneck” of multi-jurisdictional approvals, especially in China, Investing.com reported.
On SpaceX’s Oct. 20, 2026, call, Musk confirmed both boards formed special committees to study a combination, while warning a deal is not “a certainty,” Bloomberg Law reported.
Kathleen Brooks, research director at XTB, noted that Congress can slow a merger through hearings but cannot block a private transaction on its own. Extended Congressional scrutiny could still push the projected 2027 closing date further out and add uncertainty for investors in both companies.
Data center restrictions threaten SpaceX’s expansion, particularly in Texas, where Governor-elect Gina Hinojosa campaigned on pausing construction.
Goldman Sachs estimated that Democratic wins across state and local races could trigger temporary moratoria affecting about 45% of planned national capacity, as summarized by Walter Bloomberg on X.
SpaceX committed to roughly $40 billion in GPU financing with Apollo Global Management for Nvidia Vera Rubin processors. Those chips are set for delivery in the first half of 2027, creating a timing risk if data center permitting stalls in key states.
The hardware could arrive before the facilities meant to house it are operational, stranding billions of dollars in committed capital.
3 signals that will determine whether the sell-off lasts
SpaceX shares rebounded 8.62% on Nov. 6, 2026, but remained below its June IPO price.
The recovery offers some relief, but the concerns behind the sell-off remain. Political uncertainty, potential AI regulations, and delays to data center construction could all affect SpaceX’s growth plans.
Goldman Sachs identified the duration of moratoria as the decisive factor, warning that an extended freeze shifts the impact from a temporary delay to a lasting loss of capacity, Reuters reported.
Starship’s development is another important indicator. Stifel highlighted the upcoming Flight 15 mission as a key milestone for the rocket’s reusability and SpaceX’s longer-term orbital computing ambitions, according to Investing.com.
Construction permit timelines in Texas, Georgia, and other key states will also determine how quickly SpaceX can expand its AI infrastructure and put its planned computing hardware to work.
Together, these factors will help determine whether the recent decline was a temporary reaction to the midterm results or the beginning of a longer-term reassessment of SpaceX’s growth prospects.
Related: Elon Musk sends startling message on SpaceX, Tesla merger
