Elon Musk bet nearly half a billion dollars that political spending could keep Washington friendly to his sprawling business empire. On Tuesday, that bet came up short.<\/p>\n
As Democrats recaptured control of the US Congress in the midterm elections, the world\u2019s richest man found himself facing an abruptly altered political landscape.<\/p>\n
After pouring a record-breaking US$474 million into political groups \u2013 overwhelmingly backing Republicans \u2013 Musk now faces a divided Washington keen to examine his sprawling web of domestic government contracts and deep commercial links to China<\/a>.<\/p>\n The political shift threatens to complicate operations across Musk\u2019s corporate universe just as his enterprises, from Tesla and SpaceX to xAI, have become deeply intertwined with both Washington and Beijing.<\/p>\n Markets reacted swiftly on Wednesday morning. SpaceX shares fell 4 per cent and Tesla tumbled 5 per cent shortly after the opening bell.<\/p>\n Musk attempted to laugh off the setback on social media, writing: \u201cGuess my election-interfering space lasers didn\u2019t work this time.\u201d<\/p>\n He said in another post: \u201cData centres in space looking pretty appealing right now.\u201d<\/p>\n Behind the bravado, billions of dollars are on the line. Under US President Donald Trump\u2019s second administration, Musk\u2019s ventures flourished on the back of major federal contracts and swift regulatory approvals.<\/p>\n Since stepping down from his controversial post heading the Department of Government Efficiency (Doge) in May 2025, his companies had secured at least US$10 billion in new federal deals, according to an October report by the Democracy Defenders Fund, a non-profit watchdog.<\/p>\n Nowhere is the scrutiny expected to bite harder than at SpaceX<\/a>, whose role as a major defence contractor makes it a particularly obvious target for congressional oversight.<\/p>\n Democrats … want to examine Musk\u2019s government contracts and potential conflicts of interest involving SpaceX and Tesla<\/p>\n Christopher Tang, University of California, Los Angeles<\/p>\n In May alone, SpaceX won two US Space Force contracts worth a combined US$6.45 billion, including a US$4.16 billion agreement to develop satellites capable of tracking airborne threats.<\/p>\n Meanwhile, his AI venture, xAI, landed a nearly US$200 million Department of Defence contract in July 2025.<\/p>\n \u201cThe new Democrat-controlled Congress will likely diminish Musk\u2019s influence in Washington to some extent, although he still seems to have Trump\u2019s ear,\u201d said Kyle Chan, a fellow at the Brookings Institution.<\/p>\n Chan noted that lawmakers could investigate SpaceX\u2019s military deals as well as Musk\u2019s conduct during his tenure at Doge, including allegations concerning the misuse of government data.<\/p>\n The Shanghai question<\/p>\n A key flashpoint on Capitol Hill is the intersection of Musk\u2019s defence portfolio and Tesla\u2019s extensive reliance on China.<\/p>\n Tesla\u2019s Shanghai Gigafactory<\/a> accounted for more than half of the company\u2019s global vehicle deliveries last year, while production elsewhere depends on a network of Chinese suppliers.<\/p>\n The company also produces energy-storage batteries in Shanghai and has been in talks to buy nearly US$3 billion of Chinese solar manufacturing equipment to support its US expansion.<\/p>\n Musk\u2019s recent hints at merging Tesla and SpaceX<\/a> \u2013 announcing in October that the firms had formed special committees to explore a merger \u2013 could hand lawmakers an immediate opening.<\/p>\n \u201cDemocrats have already said they want to examine Musk\u2019s government contracts and potential conflicts of interest involving SpaceX and Tesla, so expect Shanghai to be framed as a security question rather than a cost advantage,\u201d said Christopher Tang, a professor specialising in global supply chains at the Anderson School of Management at the University of California, Los Angeles.<\/p>\n Any merger review is expected to examine whether sensitive aerospace and defence technology could remain effectively insulated from Tesla\u2019s Chinese supply chain.<\/p>\n \u201cWashington controls contracts and clearances, while Beijing controls inputs, cost and speed,\u201d Tang said. \u201cThe election tightened the Washington side of that vice without loosening the Beijing side.\u201d<\/p>\n Trouble on the home turf<\/p>\n Musk\u2019s electoral setback was felt just as keenly in Texas, the de facto operational nerve centre of his empire.<\/p>\n He funnelled US$224 million into Texas races \u2013 nearly half of his overall midterm war chest \u2013 according to a CNBC analysis of campaign finance records. That did not stop Democrat Gina Hinojosa from ousting Republican incumbent Greg Abbott in the gubernatorial contest.<\/p>\n \u201cThe backlash over data centres has spread across the country, and some candidates made it a big part of their campaigns,\u201d said Daniel Kollar, deputy managing director for Greater China at consultancy Intralink.<\/p>\n