Musk Faces New Scrutiny After Midterm Losses

The 2026 U.S. midterm elections resulted in a major shift in power that directly impacts the operations of Elon Musk. Republicans lost control of both chambers of Congress, and Democrats took the governorship in Texas.

Musk spent nearly half a billion dollars to support Republican candidates and keep Texas under Republican rule. These efforts aimed to protect the interests of his companies, including Tesla and SpaceX, which are based in the state.

The financial investment did not prevent a defeat. Gina Hinojosa won the Texas governor's race against incumbent Greg Abbott. This outcome ended more than three decades of Republican control in the state.

Democrats now plan to investigate Musk's role in the Department of Government Efficiency, or DOGE. He led that initiative in 2025 despite holding leadership roles in companies subject to government oversight. Lawmakers are looking at how his team handled foreign aid programs and accessed sensitive data on Americans.

Robert Garcia, who will chair the House oversight committee, told Republicans and their allies to lawyer up. The U.S. Supreme Court has also agreed to hear arguments in a lawsuit regarding DOGE public records. The suit was filed by the Citizens for Responsibility and Ethics.

Musk’s companies face new regulatory hurdles regarding data centers. SpaceX previously told investors it is targeting a $28.5 trillion addressable market in this sector. Analysts expect a Democrat-led Congress to push for construction moratoriums due to rising electricity costs and local opposition.

Jake Dollarhide, CEO of Longbow Asset Management, noted that the Democratic sweep of Congress puts pressure on tech growth. He said the party may slow down the rapid expansion of AI infrastructure that has become common.

In Texas, Musk must deal with Governor-elect Hinojosa, who has questioned favorable deals given to him by the previous administration. She sued to obtain emails between Musk and Abbott and accused Abbott of selling out the state. Hinojosa has called for an immediate halt to new data center projects until lawmakers strengthen protections for local communities.

SpaceX operates two of the world's largest AI data centers near Memphis, Tennessee, called Colossus and Colossus II. These facilities have helped SpaceX post its first profit as a public company. The company plans further expansion at its Starbase complex in Boca Chica, Texas.

Chip research firm SemiAnalysis has identified more than nine gigawatts of planned or developing capacity for Musk's ventures. This includes new facilities at the Boca Chica site. Hinojosa has opposed a potential sale of a beachfront state park to SpaceX, a deal that Texas Monthly reported officials had discussed.

Musk will also work with newly elected U.S. Senator James Talarico. He spent heavily against Talarico to back Republican Ken Paxton in the recent race.