Elon Musk's $474 million (£351.3 million) political gamble has backfired after Democrats won the Texas governor's race and captured both chambers of Congress in the 3 November US midterm elections.
Gina Hinojosa's victory over Republican Governor Greg Abbott threatens to reshape the political relationships that helped Tesla and SpaceX expand in Texas.
The results mark a significant setback for Musk, one of the Republican Party's biggest financial supporters. His companies now face the prospect of tougher scrutiny over tax incentives, government contracts and future development projects.
The political shift also creates challenges in Washington, where Democratic lawmakers have previously questioned Musk's business dealings with federal agencies.
Musk's $474 Million Political Bet Fails to Keep Texas Republican
Musk contributed approximately $474 million (£351.3 million) to federal and state political groups between January 2025 and October 2026, according to a New York Times analysis of campaign finance disclosures.
The total included about $216 million (£160.15 million) for America PAC, $168 million (approximately £124.56 million) for the Senate Leadership Fund and $30 million (approximately £22.27 million) for the Congressional Leadership Fund.
Another $44 million (approximately £32.62 million) went to other Republican groups and candidates, while roughly $16 million (£11.88 million) supported state-level political efforts.
The figure represents disclosed contributions across the election cycle, not spending exclusively on losing candidates. It may also underestimate Musk's total political giving because some later contributions were excluded.
Despite that backing, Republicans suffered major defeats. Hinojosa unseated three-term Governor Abbott, becoming Texas's first Democratic governor in more than three decades. Democrat James Talarico also defeated Republican Ken Paxton in the state's US Senate race.
According to WIRED, candidates supported by America PAC had lost 20 races and won just one by Wednesday morning. Another 21 contests remained undecided.
Texas Governor-Elect Challenges Musk's Business Arrangements
Texas has become central to Musk's business empire. Tesla operates its headquarters and a major manufacturing plant in Austin, while SpaceX runs its Starbase rocket launch complex in South Texas.
Both companies expanded during Abbott's administration, benefiting from a business environment that included substantial financial incentives.
WIRED reported that Abbott's office oversaw more than $1.6 billion (approximately £1.19 billion) in tax incentives associated with Musk's business interests. Future arrangements could face closer examination under Hinojosa, who has publicly criticised the outgoing governor's dealings with the billionaire.
According to Reuters, Hinojosa sued to obtain correspondence between Musk and Abbott. She also opposed a potential sale of state parkland to SpaceX, raising questions about future expansion near Starbase.
Her election does not invalidate existing agreements or prevent either company from operating in Texas. However, new incentives, land transactions and projects requiring government approval could face tougher negotiations.
SpaceX's AI Expansion Faces Fresh Obstacles
Artificial intelligence infrastructure presents another potential source of conflict between Musk and Texas's incoming administration.
Hinojosa has called for a moratorium on new data centre developments until lawmakers introduce stronger protections for local communities. She also wants to end tax breaks for such projects.
Her proposals reflect concerns about rising electricity costs, water consumption and pressure on public infrastructure.
The restrictions could complicate SpaceX's planned AI expansion in Texas. Reuters reported that the company's AI operations include the Colossus and Colossus II computing facilities near Memphis, Tennessee.
SpaceX aims to increase its computing capacity from 1.7 gigawatts at the end of September to as much as three gigawatts by the end of 2026. Chip research firm SemiAnalysis has also identified planned computing developments at Starbase.
Texas restrictions would not directly govern the Tennessee facilities. However, additional requirements could delay proposed developments in Texas or increase their costs.
Any moratorium would depend on future decisions by state authorities and the applicable approval processes.
Tesla and SpaceX Shares Fall After Election Results
Financial markets also reacted as investors assessed the changing political landscape.
Reuters reported on 4 November that SpaceX shares had fallen 5.5%, while Tesla was down 5.1%. Both companies lagged the broader US stock market.
The declines followed the Democratic victories, although the election results cannot be established as the sole cause of either company's share-price movement.
In Washington, Democratic control of Congress could increase scrutiny of Musk's dealings with federal agencies.
Lawmakers have previously questioned government contracts and subsidies awarded to his companies, federal workforce reductions during his involvement with the Department of Government Efficiency and restrictions on satellite communications used by Ukraine's military.
Greater congressional oversight could bring additional hearings, document requests and investigations. However, a change in congressional leadership does not automatically cancel existing contracts.
Any resulting restrictions would depend on subsequent investigations, legal authority and decisions by the relevant agencies.
Musk Faces a Different Political Landscape
Musk appeared to acknowledge the election setback with a joke on X.
'Data centers in space looking pretty appealing right now,' he wrote after the results emerged, referring to SpaceX's plans for orbital computing infrastructure.
The billionaire retains extensive business operations in Texas, while Tesla and SpaceX continue to pursue major expansion plans.
However, the election has weakened the political alliances that supported Republican control in Texas and Washington.
For both companies, the immediate challenge is not the loss of existing operations but the possibility of closer scrutiny, more difficult negotiations and slower approval processes.
Whether those risks become financial setbacks will depend on the policies adopted by Texas's incoming administration and the newly elected Congress.
