What had seemed like a symbiotic relationship between U.S. President Donald Trump and tech giant Elon Musk has turned into a very public and dramatic breakup—Tesla stock reeling from the fallout.
The blowup was triggered when Musk sharply criticized Trump's most recent tax-and-spending bill on Twitter. Trump responded by vowing to pull federal contracts from Tesla and SpaceX.
This political turbulence only compounded Tesla's ongoing difficulties, including declining electric vehicle sales and Musk’s growing associations with far-right circles.
Since the start of the year, Tesla has lost over $380 billion in value, which is the most affected among leading global stocks. According to Reuters, the market capitalization of Tesla has plummeted by 29.3%, sending it from the eighth to the tenth position among the global largest and most valuable companies, now standing at $917 billion.
The Biden administration made a bid to step in, allegedly holding a call with Musk to de-escalate the heightened tension. Despite Tesla stock experiencing a modest rebound on Friday, the overall financial harm remains far from being resolved.
Asked if such a call with Musk was actually scheduled, Trump brusquely replied, "You mean the guy who lost his mind?" He added that he was "not particularly" interested in talking to Musk right now.
In other parts of the technology industry, Apple also had a tough year, dropping to third place in worldwide market capitalization. Its $2.99 trillion valuation is down 20%, primarily because of dwindling Chinese demand, AI-related missteps, and revived trade tensions under the Trump administration.
Tesla's shares plunged sharply 14% on Thursday, wiping out more than $150 billion in market value—the biggest one-day loss in the company's history. The sell-off came after Musk publicly rebuked Trump's proposal to eliminate the $7,500 EV subsidy by the end of 2025.
This market fall also affected related businesses—Destiny Tech100 Inc., a significant SpaceX shareholder, dipped by 13%. Short sellers, on the other hand, profited by almost $4 billion, the second-largest one-day profit in history, according to figures from Ortex.
Friday provided temporary relief: Tesla stock rose 5.2% to $299.46 in early trading and ultimately closed 3.7% higher at $295.14, above the 50-day moving average. Albeit, Tesla fell 15% for the week, its worst single-week decline since October 2023.
This year up to this point, Tesla's stock has declined by 22%, the worst performer among the so-called "Magnificent Seven" tech behemoths. Still the most valuable automaker with a valuation of $1 trillion, worries persist, particularly in view of its lofty price-to-earnings ratio of 140 and growing political headwinds.
Musk formally resigned from his advisory position within the Trump administration last week amidst growing pressure from Tesla shareholders. While the split at first appeared cordial, it soon became hostile.
Ever since he left, Musk has vocally condemned Trump's bill tax plan as a "disgusting abomination" on X, previously Twitter. He contended that the bill risked destroying the Department of Government Efficiency (DOGE) program, a cost-cutting program that Musk had been actively involved with.
Trump retaliated by accusing Musk of betraying him since the relationship was no longer politically advantageous. Trump stated in the Oval Office on Truth Social: "The simplest way to reduce expense on our Budget, Billions and Billions of Dollars, is to cancel Elon's Governmental Subsidies and Contracts. I was always amazed that Biden never did it!"
He also insisted that he had requested Musk to resign, referencing the elimination of the EV mandate: "Elon was 'wearing thin,' I asked him to leave, I took away his EV Mandate that forced everyone to buy Electric Cars that nobody else wanted (that he knew for months I was going to do!), and he just went CRAZY!"
Musk fired back on X, proclaiming he was the key to Trump's 2024 presidential campaign success and complaining about the former president's ingratitude. Matters took a turn for the worse when Musk referred to Trump's supposed connection with the Epstein files, wrapping his post up in: "Have a nice day, DJT!"
Attention has now turned to Musk's other activities, such as SpaceX and Starlink, which depend on regulatory clearance and government relationships. His $300 million campaign contribution to Trump has also raised eyebrows, particularly after Musk defended Trump's impeachment and cautioned that the administration's worldwide tariffs would lead to a recession.
Tesla shares have been on a rollercoaster since Musk endorsed Trump in public last July. Although early optimism over more lenient robotaxi rules lifted shares initially, soft demand and political opposition have since undone those gains.
Market analysts are divided on the Trump-Musk controversy's long-term effect. Dan Ives of Wedbush, a recognized Tesla bull, explained to Bloomberg, "It's a fight in junior high school where these two best friends are now frenemies." He further said, "It's a Twilight Zone moment for all the investors, because nobody wants to see Trump go from being an enormous supporter of Musk and Tesla to being an enemy."
Numerous Republican legislators remain supportive of Trump in the showdown. Such support is positive for the tax bill, which seeks to eliminate the $7,500 EV tax credit at the end of this year—seven years ahead of schedule. Tesla stands to lose as much as $1.2 billion a year in profits if the bill is signed into law, JPMorgan estimates.
Paul Stanley of Granite Bay Wealth Management pointed out that the celebrity feud is escalating Tesla's political and reputational risk profile. "As much as the office of the presidency has inherent powers, I don't see how this could be anything but detrimental to Tesla and Musk," he cautioned.
In the future, Tesla is preparing to roll out its robotaxi service on June 12 in Austin, Texas—a linchpin in Musk's larger plan to shift his company towards AI and autonomous driving.
Wedbush's Ives sees this as a turning point, describing it as "the beginning of the autonomous vision and the new chapter of golden growth." Even with today's headwinds, he counseled holding on: "I still think that they remain friends and allies with one another, but this is certainly a little white-knuckle time for Tesla investors."
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