Elon Musk's Tesla and SpaceX Lost More Than $420 Billion in Combined Market Value in Two Days After Democrats Swept the Midterms, With Investors Fearing New Congressional ...

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Given the nature of their businesses, Tesla and SpaceX's exposure to political risk won't subside anytime soon.

Elon Musk-led publicly traded corporations, Tesla (NASDAQ:TSLA) and Space Exploration Technologies (NASDAQ:SPCX), remain volatile. In the days following the U.S. midterm election, they shed a combined $420 billion in market value. Both companies recovered most of these losses and are now back around their pre-election levels, but this recent episode highlighted the extent to which Tesla and SpaceX are exposed to political risk. It's worth digging deeper into it and discussing the potential implications for investors considering either stock.

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Tesla and SpaceX's prospects largely hinge on their artificial intelligence (AI)-related investments. Consider first the case of Tesla. The company's Optimus robot and especially its robotaxi ambitions are the reason the stock continues to command high earnings multiples, despite a mixed (at best) performance from its core electric vehicle (EV) business over the past two years.

Tesla needs considerable computing capacity to train AI models behind its Full Self-Driving (FSD) software and its Optimus humanoid robot. That's why the recent election results could create a problem for the company, as voters elected officials who ran on limiting data center expansion.

But that's just one of the many issues it could face. Several other aspects of Tesla's business could come under regulatory scrutiny, potentially triggering congressional probes. Tesla's recent launch of the Cybercab, which attracted scrutiny from regulators as soon as it hit the road, could once again come under investigation. If it does, it would be a blow to one of Tesla's most promising business ventures, potentially forcing the market to adjust its expectations accordingly.

Musk's other business…

SpaceX…

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