Following significant Democratic victories in the recent midterm congressional elections, some analysts on Wall Street have expressed concerns that Elon Musk could face risks of political retribution. However, there's a prevailing sentiment that he will likely remain protected, presenting a potential 'buy-the-dip' opportunity for investors interested in his company, SpaceX.
SpaceX shares experienced considerable volatility recently. After an initial 6% surge in early trading on Friday, the stock saw a notable decline, dropping nearly 13% across Wednesday and Thursday, in the aftermath of the November 3rd election.
Deutsche Bank, through analyst Edison Yu, suggests that these perceived risks may be more a matter of 'perception' than actual reality. Yu highlights two key factors: Musk's near-monopoly in the crucial rocket launch sector, and the fact that his companies primarily conduct business with the executive branch, which remains under Republican control. Yu stated in a Friday note, "With Elon Musk having provided significant financial support to the Republicans, we think there is a perception of potential political retribution. While there are ways for Congress to interfere, nearly all dealings are conducted with executive branch agencies." Consequently, Yu reiterated a 'buy' rating on SpaceX stock, setting a $250 price target.
The article also touches on Texas, a traditionally conservative state that shifted blue at the gubernatorial level in Tuesday's election, a development with broad implications for data center expansion and the broader AI market. Wells Fargo, in a November 2nd note, indicated that nearly a third of projected data center capacity is planned for Texas. Nevertheless, Yu believes Musk is shielded from potential data center complications in Texas, as a substantial portion of SpaceX's computing power is located outside the state. "We think the vast majority of SpaceX's compute will be outside Texas in 2027E (8-10 GW) so this doesn't impact our estimates in the near term," he elaborated.
Elon Musk also received public support from longtime SpaceX advocate Ron Baron, founder and CEO of Baron Capital. Speaking on CNBC's "Squawk Box" on Friday, Baron acknowledged the pressure Musk is encountering from Democrats, noting, "A lot of [Democrats] who were elected have spoken negatively about Musk."
