Elon Musk bet heavily on keeping Texas a republic. What will happen to his business empire now?

- American billionaire Elon Musk spent nearly half a billion dollars in the midterm elections to support Republican candidates, most of which was to help Ken Paxton defeat Democrat James Tallarico in the Senate elections for Texas. But other surprises achieved by Democrats in the state, in the elections for governor and attorney general, may cause bigger problems for Musk and his two Texas-based companies: SpaceX, a rocket and artificial intelligence company, and Tesla, an electric car manufacturer.

Not only will it likely face greater regulatory scrutiny, but the candidates for both positions have directly criticized Musk and his companies during their election campaigns. Commenting on the implications of Tuesday’s election results for Musk, technical analyst Daniel Ives, an investor in SpaceX and Tesla, said: “It is not so much about the blue wave in the Senate or the House of Representatives, but rather about the position of governor of Texas.”

Democrat Nathan Johnson, who will replace Paxton as Texas attorney general, said in July that if elected, he would open an investigation into whether SpaceX's Starlink service unfairly received grants intended to expand broadband internet in rural areas. This Internet service is the most profitable unit of SpaceX.

Gov.-elect Gina Hinojosa, who ousted incumbent Gov. Greg Abbott, has also made opposition to data centers a key component of her campaign. It pledged to stop building new data centers.

Both Tesla and SpaceX depended for their future success on their efforts in the field of artificial intelligence. SpaceX is planning huge investments in new data centers in the next year, including the massive Colossal 3 center that will be built outside Brownsville, Texas.

Unlike many AI companies, SpaceX makes money from selling usage time on its servers and cloud platforms to other AI companies. The temporary freeze proposed by Hinojosa would represent a major blow to the company's plans.

“What I mean is that plans for data centers in Texas are an essential part of Musk’s ambitions,” Ives said. He added that this is the reason for the decline in the shares of SpaceX and Tesla on Wednesday, as they both fell by more than 3%, despite the rise in the shares of many other technology companies.

Elon Musk, the richest person in the world with a net worth estimated at about $898 billion, is unlikely to care about the money he lost as a result of his support for the Republican Party, or even the decline in the value of his shares that occurred on Wednesday. The biggest problem for Musk is the increasing scrutiny surrounding his work, which he pointed out on his social media platform, “X”, on Wednesday.

“Data centers in space seem like a very attractive option right now,” Musk wrote, referring to his long-term ambitions. Experts say that establishing and operating data centers in outer space still faces many obstacles.

Even if this becomes possible, SpaceX may be forced to launch its flights from a space base in Louisiana, if the state of Texas takes measures to limit launches. SpaceX has faced public criticism for operating its Starbase space base on the Texas Gulf Coast.

Some residents near launch facilities have long expressed concern about disturbing sonic booms — which can sound as loud as gunshots and sometimes register as mild earthquakes — and filed a class-action lawsuit this year. SpaceX did not respond to a request for comment on this lawsuit.

But Musk had previously downplayed these sonic explosions, as he said in a post on “X” in 2022, “Storms and hurricanes are much more dangerous than Starship launches.” However, these residents' complaints may find more sympathy in Hinojosa than in Abbott. (Hinojosa's campaign did not respond to Ufoq News' questions about its position on the space base.)

Tesla's self-driving taxis, "Robotaxi", are only operated in four cities in Texas and three cities in Florida. For comparison, Alphabet's rival Waymo operates its cars in 15 cities across the country.

Local governments are the ones who decide which vehicles, self-driving or otherwise, are allowed on their roads. One expert said: “It would be a huge blow if self-driving taxis (Robotaxis) face more regulatory restrictions.”

Tesla did not disclose the profits or losses of its Robotaxi service. But Musk explained that Tesla's future lies in providing mobility services through these cars, not in selling the cars themselves.

Ives pointed out that a large part of Tesla's value assessment is based on expectations that the "Robotaxi" service will eventually operate nationwide. Ives said Hinojosa's threat to the artificial intelligence industry goes beyond SpaceX alone.

Texas is considered a key to the development of artificial intelligence in the United States, as it contains the largest number of data centers planned to be established in the country, according to the research company Cleanview, and it ranks second after Virginia in terms of the number of centers open or under construction. “Hinojosa is a politician known for her opposition to data centers, and her stance is negative toward artificial intelligence development, making concerns about the future of data center development in Texas a real concern for technology investors,” Ives added in a note to investors on Wednesday.