Musk Faces $500 Million Loss and Federal Probes After Midterm Defeat

Elon Musk spent approximately $500 million to support Republican candidates in the U.S. midterm elections, a financial effort that failed to prevent a Democratic takeover of both chambers of Congress. The billionaire’s largest political investment centered on Texas, a state hosting major operations for his companies Tesla, SpaceX, and a joint chipmaking venture. Despite his funding, Democrats secured control of the House and Senate, and Gina Hinojosa defeated incumbent Greg Abbott for the Texas governorship, marking the first Democratic victory in that race in over three decades.

The election results position Democratic lawmakers to launch investigations into two major Musk interests. Reports indicate that new congressional probes will target the Department of Government Efficiency, which Musk led in 2025. During that period, DOGE dismantled foreign aid programs and faced allegations that staff members illegally accessed private American data. Musk’s role in the department drew scrutiny because he headed companies subject to government oversight while regulatory probes remained active. Robert Garcia, the incoming chair of the House Oversight Committee, issued a brief directive to Republican allies: "Lawyer up."

The U.S. Supreme Court has also agreed to hear arguments in a lawsuit filed by the Citizens for Responsibility and Ethics regarding DOGE. The watchdog group is seeking public records on the department’s activities. Separately, Democratic interest is growing in Starlink’s role in Ukraine. Lawmakers plan to examine restrictions on satellite communications that Ukrainian military forces have used, a topic that has recently drawn scrutiny from the opposition party.

Beyond federal politics, Musk faces hurdles in Texas where data center expansion is slowing. Analysts predict that a Democrat-led Congress will tighten scrutiny on these projects and push for construction moratoriums due to rising electricity costs. Jake Dollarhide, CEO of Longbow Asset Management, noted that the Democratic sweep would pressure the tech sector and potentially slow the rapid growth seen in AI infrastructure. He described Musk’s funding as a last-ditch effort that could not overcome consumer concerns about utility bills and grocery prices.

Musk’s relationship with the new Texas administration presents specific challenges. Governor-elect Hinojosa has sued to obtain emails between Musk and Abbott, accusing the former governor of selling favorable deals to the billionaire. Hinojosa stated that "Texas is not for sale" and called for an immediate halt to new data center projects until lawmakers strengthen community protections and end tax breaks. Her office has also opposed the potential sale of a beachfront state park to SpaceX.

SpaceX’s AI business relies on Colossus and Colossus II, two of the world's largest data centers near Memphis, Tennessee. Revenue from renting computing power to customers like Anthropic helped SpaceX post its first profit as a public company. SemiAnalysis has identified more than nine gigawatts of planned or developing capacity, including facilities at SpaceX’s Starbase complex in Boca Chica, Texas. That expansion may face local resistance as Hinojosa has opposed the sale of state park land to the company.

Musk urged his followers on X to vote Republican as recently as Tuesday. The company’s relocation from California to Texas was driven by favorable state deals. The new political environment in both Washington and Austin will test the durability of those arrangements.