Elon Musk's Tesla and SpaceX Lost Over $420B in Two Days After US Midterms as Probe Fears Mount

Elon Musk's Tesla and SpaceX recovered most of a combined $420 billion (£317.4 billion) decline following a US midterm election, according to an undated investment analysis warning that political and regulatory pressures could affect both businesses. The election year and the dates of the decline and recovery are not identified.

The analysis places both companies around their pre-election levels at the time of writing, while arguing that their valuations depend heavily on ambitious projects. For Tesla, those include robotaxis and humanoid robots. For SpaceX, it highlights space travel and plans to expand computing capacity for artificial intelligence services.

Political Uncertainty Surrounds Musk's AI Plans

The analysis links the election outcome to possible restrictions on data-centre expansion. It states that voters elected officials who campaigned to limit such development, although it does not name those officials or identify specific measures.

Tesla requires substantial computing capacity to train the artificial intelligence models behind its Full Self-Driving software and Optimus humanoid robot, the analysis explains. Restrictions could therefore complicate those ambitions, but the article describes a potential obstacle rather than an enacted policy.

The author presents Optimus and robotaxis as important reasons for Tesla's high earnings multiple, contrasting those ambitions with what the analysis describes as mixed performance from its core electric-vehicle business. Its investment argument centres on the potential of these projects and the risks that could affect their development.

Cybercab Scrutiny Adds to Musk's Regulatory Exposure

Tesla's Cybercab is another possible point of regulatory pressure. The analysis states that the vehicle attracted scrutiny when it hit the road and suggests it could face another investigation.

It does not identify the regulators, specify the earlier scrutiny or establish that a further inquiry has begun. Its argument is that additional intervention could affect expectations for a venture it considers important to Tesla's prospects.

SpaceX also faces possible constraints, according to the analysis. It describes plans for greater computing capacity to meet demand for artificial intelligence services. The author argues that restrictions on data-centre expansion could interfere with those plans, without establishing that such restrictions have been imposed.

The author further suggests that federal contracts could be vulnerable if lawmakers conclude that the US government depends too heavily on SpaceX. That is a prediction about possible future revenue, rather than evidence of an announced contract reduction.

Valuations Shape the Investment Case for Musk's Companies

A possible Tesla and SpaceX merger adds another uncertainty. The analysis states that both boards formed special committees to assess a combination, while stressing that there is no guarantee they will proceed. It predicts regulatory resistance if they do.

The article assigns forward earnings multiples of 48.4 to SpaceX and 159.5 to Tesla, without specifying a valuation date or the underlying calculations. Those figures represent the analysis's stated valuations rather than verified current trading measures.

Its positive investment case includes Starship, which it describes as designed for full reusability and potentially lower launch costs. Tesla's robotaxi service could become more profitable with sufficient scale and utilisation, while Optimus offers another possible opportunity.

Nevertheless, the author considers the share prices discussed in the analysis too demanding given the risks and the success already anticipated from those projects. The author would reconsider after a decline of perhaps 20% or more from those unspecified price levels.