Musk projected government revenue would fall below 10% of SpaceX’s sales this quarter and below 5% a year later.

  • Musk offered to cancel unwanted SpaceX government contracts, saying they deliver the best product at the lowest price.
  • Deutsche Bank urged investors to buy SpaceX’s political dip, maintaining a $250 target implying about 84% upside.
  • The firm expects most SpaceX compute capacity to be outside Texas in 2027, limiting near-term exposure to potential restrictions.

Elon Musk criticized California’s taxes and offered to cancel unwanted SpaceX government contracts, while Deutsche Bank said that post-election political fears had created a buying opportunity in the stock.

Musk Backs Texas, Blames California

Musk’s comments came after Democrats won control of both the U.S. House and Senate in the midterms. In Texas, Democrat Gina Hinojosa defeated Republican incumbent Greg Abbott, ending more than three decades of GOP control of the governor’s office. The results raised concerns about closer scrutiny of Musk’s businesses in Washington and Texas. 

“SpaceX and Tesla have prospered in Texas, because we were not constantly operating under an oppressive and extractive state government,” Musk said on X. He said staying close to his factories helped shape the companies’ expansion decisions. SpaceX’s first major factory was in Los Angeles, while Tesla’s was in the San Francisco Bay Area.

“And I need to be close to the factories, so that I can walk the floor in person,” he said. “As California became increasingly difficult, due to extreme taxes and overregulation, we moved our major domestic expansions and HQ to Texas,” Musk added.

Tesla moved its corporate headquarters to Austin in December 2021. Musk announced SpaceX’s headquarters move from California to Starbase, Texas, in 2024. 

Texas has also backed SpaceX’s expansion with financial support. In August, the governor’s office announced a $30 million Texas Enterprise Fund grant for the company’s semiconductor plant in Grimes County. The project’s first phase includes a $16.8 billion investment and is expected to create 3,000 jobs.

Musk: ‘Happy To Cancel’ Unwanted Contracts

Additionally, Musk offered to cancel unwanted SpaceX government contracts while defending their value.  “SpaceX contracts with the government are BOTH the best product AND the lowest price!” he said.

Musk said government business would generate less than 10% of SpaceX’s revenue this quarter and less than 5% a year from now, signaling a declining reliance on government customers. “Happy to cancel any that the government doesn’t want. Just say the word!” he added. Musk also said Tesla had no government contracts and highlighted the end of federal EV incentives. 

Why Deutsche Bank Says Buy The Dip

Deutsche Bank urged investors to buy SpaceX’s post-election pullback, reiterating its ‘Buy’ rating and $250 price target on Friday, implying an 84% upside from current levels. The firm said that fears of political retaliation against Musk may outweigh the near-term risks to the business.

“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,” the firm said, according to a note cited by CNBC.

The executive branch remains under Republican control, and SpaceX’s federal customers include NASA, the U.S. Space Force and the National Reconnaissance Office.

Deutsche Bank also pointed to SpaceX’s dominant launch position, arguing that cutting funding without viable alternative providers could undermine U.S. interests.

Compute Elsewhere Could Cushion SpaceX

Texas’s election of a Democratic governor has put data-center expansion under the spotlight. Almost a third of U.S. data-center capacity is expected to be in the state, according to Wells Fargo.

Meanwhile, Deutsche Bank said that SpaceX’s computing footprint could limit its exposure to potential restrictions. “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,” the firm said. The bank expects closer scrutiny of Texas data-center projects rather than an outright ban.

Longtime SpaceX investor Ron Baron also acknowledged the political pressure during Friday’s CNBC appearance. “A lot of [Democrats] who were elected have spoken negatively about Musk,” the Baron Capital founder and CEO said.

How Do Retail Traders Feel About TSLA And SPCX?

On Stocktwits, retail sentiment for TSLA was ‘extremely bearish’ amid ‘normal’ message volume, while SPCX sentiment was ‘bullish’ amid ‘high’ message volume. 

While TSLA stock has declined 20% year-to-date, SPCX has declined 17% over the same period. 

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