The Texas blue-turn has seriously dampened SpaceX (SPCX.US) stock prices. Musk made a tough statement: the government contract can be withdrawn! Deutsche Bank is optimistic about a “political correction” as a buying point

The Zhitong Finance App learned that after the Democratic Party won the Senate and House of Representatives in the midterm elections and Democrat Gina Hinojosa (Gina Hinojosa) defeated current Republican Governor Abbott, Musk brought back the topic of tax burdens and regulation on X — Musk criticized California's “excessive taxation” and proposed canceling the SpaceX deal with the government. Deutsche Bank analysts think this is a good time for political bargains.

“SpaceX (SPCX.US) and Tesla (TSLA.US) are doing well in Texas because we don't have to operate under an oppressive, extractive state government for a long time.” He wrote and explained that it was necessary to be close enough to the factory to personally walk into the workshop: both companies moved from California — Tesla moved its headquarters to Austin in December 2021, and SpaceX announced that it would move its headquarters to Starbase in Texas in 2024. “As California becomes harder to do due to extreme taxation and excessive regulation, we have moved our major domestic expansion and headquarters to Texas.”

On the same day, he also offered a rare offer to abandon the government business: “SpaceX's contract with the government is both the best product and the lowest price!” He wrote and added that government business accounted for less than 10% of the company's revenue this quarter and less than 5% a year later. “If the government doesn't want it, we're happy to cancel it; just say it.” He also stressed that Tesla does not have any government contracts and that federal electric vehicle subsidies have ended.

Texas's support for SpaceX is real: in August of this year, Governor Abbott announced that SpaceX will build a Terafab semiconductor plant in Grimes County, with a capital investment of more than US$16.8 billion and the creation of 3,000 jobs. The state government provided $30 million in performance subsidies through the Texas Enterprise Fund, and the project was also included in the JETI tax incentive program. On the other side, nearly 900 local residents signed a petition to strengthen supervision of large-scale industrial projects receiving public incentives.

Deutsche Bank: Panic comes from “perception”, not contract structure

Deutsche Bank analyst Edison Yu gave the opposite judgment in his November 6 note: Market concerns about “political retaliation” are more of a perception than a contractual structural reality.

His argument has three layers. The first layer is the channel: SpaceX's launch and satellite communications contracts are all signed to federal administrations — NASA, the Space Force, and the National Reconnaissance Service, and the executive branch is still in the hands of the Republican Party; “Congress does have a way to intervene, but almost all deals are made with the executive branch.” The second level is substitution: in most businesses, there are no viable alternative suppliers in the market. He cites the application of “Starshield” (Starshield) in Ukraine as an example. If Congress cuts the relevant budget, it is more likely that America's own interests will be damaged. The third layer is procedure: even if SpaceX and Tesla seek a merger, the antitrust jurisdiction is between the FTC and the Department of Justice, and Congress has no right to directly block it; it can only be delayed through hearings.

Deutsche Bank also pointed out that the most real immediate risk is not in Washington, while in Austin: Texas's governor-designate is tough on data centers. Her original statement was “We need to stop what is happening in data centers until protections are put in place”. According to Deutsche Bank's judgment, this is more likely to result in stricter scrutiny than a one-size-fits-all ban; and according to the bank's estimates, the vast majority of SpaceX's 8-10 gigawatts of computing power in 2027 will be deployed outside of Texas, so the impact on recent profit forecasts is limited — but if Texas regulations are tightened, the unit cost of newly built computing power may exceed $35 per watt, and expansion plans after 2028 face uncertainty.

There is also a counterintuitive inference: if Texas policies cause the overall expansion of computing power across the US to slow down, SpaceX may instead benefit — it can be built faster and cheaper, while the neocloud contract can be cancelled within 90 days, and it has room to reprice when supply is tight.

Falling out of the “value pit”?

After the November 3 election, SpaceX's stock price fell by a cumulative total of nearly 13% on Wednesday and Thursday, and closed at $123.62 on November 5; it rebounded 6% in early trading on November 6. Deutsche Bank reiterated its “buy” target price of $250, implying about 84% of the room based on today's price — about 87% if the November 6 closing of $134.27 was the benchmark.

Fundamentally, the company just handed over a quarterly report that exceeded expectations: profit of $0.35 per share for the third quarter, far exceeding market expectations of $0.13 billion; revenue of $14.58 billion, higher than the $12.72 billion consensus, up 161% year over year; AI business revenue increased about nine times from US$813 million in the same period last year to US$7.56 billion; the fourth quarter guided US$33 billion to US$37 billion, far higher than the consensus of about US$22 billion. Musk said the annual revenue target for the end of the year was $100 billion. Of the 31 analysts covering the stock, 24 bought, 5 were neutral, and 2 sold, with an average target price of $232.35.

Retail sentiments are divided: on Stocktwits they are “extremely bearish” on Tesla, “bullish” on SpaceX, and very popular; since the beginning of the year, TSLA has fallen 20% and SPCX has fallen 17%.

What is this “political pullback” bet

Let's look at the two things together: Musk used “contracts can be withdrawn” to mitigate political risks, and Deutsche Bank used “contracts signed to the administrative branch with no replacement” to prove that risk is overestimated — both are two sides of the same argument: the relationship between SpaceX and the US government is no longer “who pays the bill,” but “who is more inseparable from whom.”

But there's a crack in this bet: Texas's approvals, land, incentives, and beach closure rules are not under the federal umbrella. Deutsche Bank itself acknowledged that the governor could use these tools to create friction for Starbase's expansion. The real risk wasn't the Capitol Hill hearing, but the license at the Austin State Capitol — which explains why a rocket company was involved in the “data center approval” story this week.