After midterm elections saw Democrats take both the Senate and the House, and Texas Governor Greg Abbott was defeated by Democrat Gina Hinojosa, Musk steered the conversation on X back to taxes and regulation — Musk criticized California's "excessive taxation" and raised the possibility of cancelling SpaceX's dealings with the government. Deutsche Bank analysts view this as a good moment to buy the dip on political grounds.
"SpaceX (SPCX.US) and Tesla (TSLA.US) have thrived in Texas because we don't have to operate under an oppressive, extractive state government over the long term," he wrote, explaining that he must be close enough to the factories to personally walk into the workshops: both companies relocated from California — Tesla moved its headquarters to Austin in December 2021, while SpaceX announced in 2024 that it would move its headquarters to Starbase, Texas.
"As California becomes increasingly difficult to do business in due to extreme taxes and overregulation, we have moved our main domestic expansion and headquarters to Texas."
On the same day, he also unusually volunteered that he could give up government business: "SpaceX's contracts with the government represent both the best product and the lowest price!" he wrote, adding that government business accounted for less than 10% of company revenue this quarter and would be less than 5% a year from now. "Whatever the government doesn't want, we're happy to cancel — just say the word." He also emphasized that Tesla has no government contracts whatsoever and that federal EV subsidies have already ended.
Texas's support for SpaceX has been tangible: in August of this year, Governor Abbott announced that SpaceX would build a Terafab semiconductor facility in Grimes County, with first-phase capital investment exceeding $16.8 billion and the creation of 3,000 jobs. The state government is providing a $30 million performance grant through the Texas Enterprise Fund, and the project has also been included in the JETI tax incentive program. On the other side, nearly 900 local residents signed a petition demanding stronger oversight of large industrial projects that receive public incentives.
Deutsche Bank: Panic stems from "perception," not contract structure
Deutsche Bank analyst Edison Yu offered a contrary assessment in a November 6 note: market fears of "political retaliation" are more a matter of perception than a reality rooted in contract structure. His argument has three layers. The first layer is channel: SpaceX's launch and satellite communications contracts are signed with federal executive agencies — NASA, the Space Force, and the National Reconnaissance Office — and the executive branch remains in Republican hands. "Congress does have ways to intervene, but almost all deals are struck with executive agencies." The second layer is substitutability: in most businesses there is no viable alternative supplier on the market. He cited the use of Starshield in Ukraine as an example — if Congress cuts related budgets, it is more likely U.S. interests themselves that would suffer. The third layer is procedure: even if SpaceX and Tesla sought to merge, antitrust jurisdiction rests with the FTC and the Department of Justice, and Congress has no authority to block it directly — it can only delay through hearings.
Deutsche Bank also identified that the most concrete near-term risk is not in Washington but in Austin: the Texas governor-elect's hardline stance on data centers. Her exact words were: "We need to stop what's happening with data centers right now before protections are put in place." Deutsche Bank's judgment is that this is more likely to lead to stricter scrutiny rather than a blanket ban; and according to the bank's estimates, the vast majority of SpaceX's 8–10 gigawatts of computing capacity in 2027 will be deployed outside Texas, so the impact on near-term earnings forecasts is limited — but if Texas regulation tightens, the unit cost of newly built computing capacity could exceed $35 per watt, and expansion plans beyond 2028 would face uncertainty. There is also a counterintuitive corollary: if Texas policy causes a broader slowdown in U.S. computing capacity expansion, SpaceX could actually benefit — it builds faster and cheaper, and neocloud contracts can be cancelled within 90 days, giving it room to reprice when supply is tight.
Falling into a "value pit"?
After the November 3 election, SpaceX shares fell nearly 13% cumulatively over last Wednesday and Thursday, closing at $123.62 on November 5; in early trading on November 6, they rebounded as much as 6%. Deutsche Bank reiterated its "Buy" rating and $250 price target, implying roughly 84% upside based on that day's price — or about 87% based on the November 6 closing price of $134.27. On fundamentals, the company had just delivered a better-than-expected quarterly report: third-quarter earnings per share of $0.35, far exceeding the market expectation of $0.13; revenue of $14.58 billion, above the $12.72 billion consensus, representing 161% year-over-year growth; AI business revenue surged from $813 million in the same period last year to $7.56 billion, an increase of roughly ninefold; fourth-quarter guidance of $33–37 billion, far above the roughly $22 billion consensus, with Musk stating a year-end annualized revenue target of $100 billion. Among the 31 analysts covering the stock, 24 rate it Buy, 5 Neutral, and 2 Sell, with an average price target of $232.35. Retail sentiment is split: on Stocktwits, sentiment toward Tesla is "extremely bearish," while SpaceX is "bullish" with high engagement; year-to-date, TSLA is down 20% and SPCX is down 17%.
What is the "political pullback" bet?
Putting the two things together: Musk uses "we can cancel the contracts" to defuse political risk, while Deutsche Bank uses "contracts are signed with the executive branch and there is no substitute" to prove the risk is overestimated — these are two ends of the same argument: the relationship between SpaceX and the U.S. government is no longer about "who pays the bill" but about "who depends on whom more." But this bet has a crack: Texas's approvals, land, incentive policies, and beach closure rules are all outside the federal protective umbrella. Deutsche Bank itself acknowledges that the governor can use these tools to create friction for Starbase's expansion. The real risk is not in hearings on Capitol Hill but in permits inside the Austin statehouse — which also explains why a rocket company has been swept into the week's hottest narrative of "data center approvals."
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