Elon Musk played down the threat Democrats’ midterm gains pose to Tesla and SpaceX on Friday, saying the automaker has no government contracts and that federal work will make up less than 10% of SpaceX’s revenue this quarter, as shares of both companies rebounded from a two-day selloff.
“Tesla has no government contracts and President Trump ended federal incentives for electric vehicles,” Musk wrote on X.
“SpaceX contracts with the government are BOTH the best product AND the lowest price! Moreover government revenue will be less than 10% of SpaceX revenue this quarter and less then 5% a year from now,” he added. “Happy to cancel any that the government doesn’t want. Just say the word!”
Musk was replying “Exactly” to a post by X user Warren Redlich, who suggested Musk write to Democrats in Congress on January 1, offering to cancel any federal contracts they object to and asking them to publish a list.
Both stocks were already higher when Musk posted. Tesla was up 4.3% at $358.49 at 12:58 p.m. in New York, having opened at $348.92, and SpaceX was up 6.05% at $131.09, recovering part of the ground lost after Democrats won control of Congress and swept statewide races in Texas, where both companies are based.
Two Days of Losses
Both stocks fell on Wednesday, the day after the vote, before sliding further on Thursday as a broad technology selloff hit Wall Street.
Tesla closed at $343.69 on Thursday, down 10.8% on the day and 13.8% below its $398.50 close on election day. SpaceX ended Thursday at $123.62, down 9.1% on the day and 12.5% over two sessions, and below its $135 initial public offering price.
The Nasdaq Composite fell 5.5% on Thursday, the S&P 500 dropped 4.4% and the Dow Jones Industrial Average lost 3.4%, all reversing gains made on Wednesday, when the Dow had risen 1,569 points.
The Dow lost 1,833 points on Thursday. On Friday the Nasdaq was up 0.9% and the S&P 500 0.4% at midday, while the Dow was down 0.2%.
Even after Friday’s rebound, Tesla remained about 10% below its election-day close and SpaceX about 7% lower.
Musk also said overnight that Tesla would wind down Cybertruck production at Gigafactory Texas to make room for Cybercab output.
Contracts in the Spotlight
Musk’s post responded to Democrats’ long-running criticism of the federal contracts and subsidies flowing to his companies, which they have signaled could become a target of congressional oversight once they take control in January.
“He must answer for it under oath,” Representative James Walkinshaw of Virginia wrote on X about Musk’s role leading the Department of Government Efficiency, NPR reported.
Senator Chris Coons of Delaware wrote that Musk’s links to Russian President Vladimir Putin were “one more thing to add to the list of questions for Musk when I subpoena him.”
“They are going to need to plant new forests for all of the subpoenas we’ll be printing,” Massachusetts Senator Ed Markey wrote on election night, replying to a post asking when televised trials of Big Tech executives would begin.
SpaceX has not published the figures Musk cited. In its IPO prospectus, it said “approximately one-fifth” of its 2025 revenue came from U.S. federal agencies.
Its third-quarter 10-Q shows the shift toward artificial intelligence.
Revenue rose to $14.58 billion from $5.58 billion a year earlier, with $7.02 billion from its SI Solutions and Infrastructure business, which rents out computing capacity. An unnamed “Customer A,” whose revenue spans all three segments, accounted for 16.6% of quarterly revenue, down from 23.9%. SpaceX does not identify the customer.
SpaceX’s government customers include NASA, the Space Force and the National Reconnaissance Office. Musk did not say which contracts the government could cancel or how the revenue share would be calculated.
His statement on EV incentives is accurate. The $7,500 credit for new EVs, along with the used and commercial EV credits, is not allowed for vehicles acquired after September 30, 2025, according to the IRS, under the tax and spending law Trump signed in July of that year.
More than 160 House Democrats back a bill that would restore the credits, but party leaders have not committed to it.
Tesla’s third-quarter 10-Q identifies no government contract. It does show federal policy weighing on the company. Revenue from selling regulatory credits fell to $113 million from $417 million a year earlier, and Tesla reversed $475 million of credit revenue for the contractual return of previously delivered credits.
“Recent governmental and regulatory actions have restricted certain regulatory credit programs tied to our products,” Tesla said.
Texas Democrats Signal Cooperation
The rebound also followed signals from Texas Democrats that they would work with Musk’s companies rather than shut them out.
“We can have a strong working relationship with Elon Musk and his companies, but it has to be on our terms. It cannot be just running over the people of Texas,” Governor-elect Gina Hinojosa told CNN on Thursday.
“We have always been a pro-business state in Texas, but what changes now with me as governor is it has to be a partnership that benefits Texans,” she said. Hinojosa has called for a halt to new data center projects until stronger community protections are in place.
Hinojosa did not praise Musk. She has questioned a $1.66 billion tax break tied to Terafab, the $16.8 billion chip plant Tesla and SpaceX are building in Grimes County.
She also restated her opposition to selling land in Boca Chica State Park, next to SpaceX’s Starbase launch site, to the company. “Selling our beach to Elon Musk is just something that’s almost unimaginable. It’s unacceptable,” she said.
Musk replied “Interesting” to a post by Atreides Management Managing Partner and Chief Investment Officer Gavin Baker, who wrote that Hinojosa had said all currently permitted data centers in Texas would be allowed to finish construction.
Senator-elect James Talarico, who won Texas’s Senate race against a candidate Musk backed, praised the billionaire in an interview with NBC on Sunday, two days before the vote, according to Business Insider.
“I’m a big fan of SpaceX, of Tesla. He is a great business leader, entrepreneur, and innovator, and I want him to stick to those things,” Talarico said. “I don’t like that he’s trying to buy the Senate seat in Texas.”
Asked on CNN on Wednesday whether he would take Musk’s call, Talarico said: “Like I said, I’ll work with anyone.”
“Nice of him to say that,” Musk replied on Thursday to a post about the clip, which investor Sheel Mohnot had shared on X.
On election night, Musk had struck a different note. “Data centers in space looking pretty appealing right now,” he wrote, referring to SpaceX’s plan to put computing capacity in orbit. A minute later he added: “Guess my election-interfering space lasers didn’t work this time.”
Analysts See a Buying Opportunity
Deutsche Bank kept its ‘Buy’ rating on SpaceX on Friday with a $250 price target, below the $255 it set when it initiated coverage in July, according to Price Target, EV‘s sister publication that archives Wall Street analyst research on the EV, AI and semiconductor industries.
Deutsche Bank argued that most of SpaceX’s government business is with executive-branch agencies rather than Congress, and that there is often no viable alternative to shift that work to, so congressional funding cuts could backfire on U.S. interests.
On Texas, the bank said most of SpaceX’s computing capacity in 2027 will be outside the state, with 8 to 10 gigawatts planned, and that it expects Texas to scrutinize data center projects more closely rather than ban them.
It also said that if U.S. computing capacity growth slows, SpaceX could charge higher prices because it can build faster and cheaper than competitors.
Morgan Stanley analyst Adam Jonas reiterated his $300 target on SpaceX on Wednesday. The 29 analysts who set a SpaceX target in the last three months range from $75 to $800, with a median of $240, according to Price Target data.
Dan Ives, Partner and Senior Managing Director at Yorkville Ives & Co., said a SpaceX-Tesla merger “now faces a much tougher regulatory roadmap to get this deal done in 2027 given this new political blue roadmap in DC/Texas,” though he still expects a deal. Yorkville Ives rates SpaceX ‘Outperform’ with a $225 target.
Musk said on SpaceX’s third-quarter earnings call in October that a merger with Tesla would be a “good idea” and that special committees at both companies were exploring a deal.
Goldman Sachs analysts estimated this week that Democratic wins at the state and local level are likely to lead to short-term data center moratoriums, potentially affecting about 45% of planned U.S. data center capacity expansion, Reutersreported.
Musk’s Losing Bet
Musk gave more than $445 million to Republican candidates, political action committees and outside groups, including at least $225 million in Texas, according to OpenSecrets data cited by NPR. Most of the candidates he backed lost.
Tesla and SpaceX lost a combined $380 billion in market value over Wednesday and Thursday, according to Reuters.
Both companies are tied to the data center buildout that Texas Democrats now want to slow. Tesla’s energy unit sells storage systems to data center operators, and Musk has said Terafab will cost “tens of billions” through early 2028 and “probably be north of $100 billion long term,” according to remarks on Tesla’s October call.
