Shares of SpaceX and Tesla fell in premarket trading on Wednesday after Democrats won control of Congress and swept Texas, where both of Elon Musk’s companies are based and where he spent heavily on the losing side.
SpaceX was down 5.7% at $133.23 at 8:47 a.m. in New York, below its $135 initial public offering price. Tesla was down 5.0% to $378.47 after closing at $398.50.
The declines came a day after Morgan Stanley published a more optimistic set of long-range forecasts for SpaceX, but the bank did not change its view. It has rated SpaceX ‘Overweight’ with a $300 price target in every note since July 7 archived by Price Target, EV‘s sister publication that archives Wall Street analyst research on the EV, AI and semiconductor industries.
A Texas Sweep
Democrat James Talarico defeated Republican Ken Paxton in the race for a US Senate seat in Texas, and Democrat Gina Hinojosa unseated Governor Greg Abbott, who conceded on Tuesday night.
Musk spent more than $200 million supporting Paxton, according to the Texas Tribune.
Musk also campaigned for Paxton and against Talarico on X in the final days of the race.
“Talarico is a far left extremist,” he wrote on October 26, quoting a clip of the Democrat. On October 30, he posted that Talarico “would abolish democracy in America and institute permanent one-party rule!”
“Something seriously wrong with Talarico,” Musk wrote on October 31. The same day, he said Talarico “wants to open the borders and legalize everyone to gain a permanent majority to end democracy in America.”
On October 29, he wrote: “Tomorrow is the last day of early voting in Texas. Vote for @KenPaxtonTX!” He added “Vote Republican!” to a post about a Republican club event in Williamson County, Texas, and later posted: “I voted early today in Texas!!”
On October 30, he wrote: “Democrats will execute their plan to end democracy in America if they gain control.”
On November 1, two days before the vote, he wrote: “Talarico will vote to trans your kids.”
On Election Day, Musk reposted President Donald Trump’s endorsement of Paxton and several posts urging Texans to vote for the Republican.
Talarico had accused Musk during the campaign of trying to “buy” the Senate seat for Paxton, The National Desk reported in October.
Nationally, Democrats won majorities in both the House and the Senate, according to projections by US news organizations. They had won at least 228 House seats, more than the 218 needed for control, according to an Associated Press tally.
Musk had not posted about any of the four candidates by name since the polls closed, as of Wednesday morning.
Musk responded on X overnight. “Data centers in space looking pretty appealing right now,” he wrote. In a separate post, he added: “Guess my election-interfering space lasers didn’t work this time.”
Data Centers at Stake
Texas is central to both companies. Tesla’s headquarters, its Austin factory and its robotaxi service are in the state, and SpaceX launches its Starship rocket from Starbase on the Gulf Coast.
Hinojosa campaigned on halting new data center construction in the state. In July, she called on Abbott to sign an “emergency executive order putting a moratorium on data centers until the legislature meets.”
Her proposed conditions include union labor requirements, a community say over new sites, an end to data center subsidies and guarantees that households do not pay more for electricity or water.
Barclays flagged the possible implications for AI infrastructure in Texas, Investing.com reported, without giving details of the note.
Dan Ives, Co-Founder of Yorkville Ives & Co., wrote on X that the results would “have a negative impact on the pace of the AI Revolution buildout in the US over the next few years.”
“Texas is the key as that represents 25%-30% of AI datacenter capacity,” he added.
The Merger Question
The political shift also lands as the two companies study a combination.
Musk said on SpaceX’s third-quarter earnings call on October 20 that the boards of SpaceX and Tesla had formed special committees of independent directors to evaluate a merger. He said a deal was not a certainty and would need shareholder support.
Bloomberg has reported that the companies aim to announce a deal in the first half of next year, which could allow it to close while Trump is in office. Neither company has announced a transaction.
Morgan Stanley’s SpaceX Math
In a note published on Tuesday, Morgan Stanley analyst Adam Jonas wrote that “just 4 months since our initiation, we’ve nearly doubled our 2027 revenue (to $175B) and EBIT estimates, while pulling forward FCF break-even by four years (to 2031) and cutting ~$280bn from our projected debt issuance,” according to excerpts shared on X by Sawyer Merritt.
“FY27 and FY28 revenues have been revised up 93% and 84% to $175B and $289B respectively,” Jonas wrote. The bank’s 2028 operating income forecast was “revised up 72% to $119B.”
The 2027 revenue figure is slightly below the $178 billion Jonas gave in an October 21 note archived by Price Target, so the near-doubling is measured against his initiation estimates rather than his most recent ones.
“At the time of our initiation, we had expected SPCX to be FCF negative until 2035. Today, we forecast the company to achieve positive FCF by 2031,” he wrote.
At initiation, Morgan Stanley expected SpaceX to raise a combined $670 billion of external funds through 2035. It now forecasts $390 billion of borrowing through 2031.
“At our new 2028 earnings (adj.) of $109B and the current market cap of $1.91T ($140 a share), SPCX would trade at 17.6x P/E, cheaper than the S&P500 2028 forward P/E of 17.7x (MSe), while growing earnings at a ~150% CAGR from 2026-2030e,” Jonas wrote.
The $300 target implies upside of about 125% from Wednesday’s premarket price.
Jonas attributes about $123 of the share price to SpaceX’s space and connectivity businesses and about $17 to its AI operations, Investing.com reported. He named the next Starship flight, expected this month, as a catalyst.
Morgan Stanley and Goldman Sachs led the bank syndicate on SpaceX’s initial public offering, which priced 555,555,555 Class A shares at $135 on June 11. The bank has previously mapped ties between Tesla and SpaceX in “physical AI”.
Where Analysts Stand
The 29 analysts tracked by Price Target on SpaceX over the past three months have a median price target of $230, with a range of $75 to $800.
Barclays raised its SpaceX target to $300 from $254 on October 22, matching Morgan Stanley’s.
On Tesla, Morgan Stanley is more cautious. Analyst Andrew Percoco raised his price target to $410 from $400 on October 22 and kept an ‘Equal-weight’ rating.
Barclays upgraded Tesla to ‘Overweight’ on October 26 and lifted its target to $450 from $370. The median among 17 analysts is $442.
The Shares
SpaceX began trading on the Nasdaq on June 12. At the premarket price, the stock is 41% below its 52-week high of $225.64 and 27% above its low of $104.83.
Tesla had risen to a three-month high in late October as its Texas robotaxi fleet passed 1,000 vehicles. Before Wednesday’s drop, the shares were 34% above their 52-week low of $297.38, reached in late July.
The selling was concentrated in Musk’s companies and AI infrastructure stocks. Nasdaq 100 futures were up 0.4%. CoreWeave was down 6.6% and Iren 5.3% before the bell.
Space stocks that fell overnight had recovered. AST SpaceMobile was up 0.6% and Rocket Lab was flat from Tuesday’s close.
Tesla holds its annual shareholder meeting on December 3.
