Tesla’s stock plummeted 14% on Thursday, wiping out approximately $150 billion in market capitalization, following a public clash between CEO Elon Musk and President Donald Trump.
This dramatic market downturn underscores the potential risks associated with Musk’s increasingly strained relationship with the White House, a government known for its forceful actions against perceived adversaries.
The conflict escalated when Trump threatened to terminate government contracts with Musk’s companies, including SpaceX, which holds tens of billions of dollars in government agreements. Musk responded defiantly, stating, “Go ahead, make my day.”
The public dispute, unfolding on social media, quickly deteriorated from policy disagreements into a series of personal attacks. Wedbush Securities analyst Dan Ives, a long-time Tesla supporter, described the situation as “jaw-dropping and a shock to the market.”
Ives expressed investor concern regarding potential regulatory ramifications for Tesla, particularly as the company expands into autonomous driving and robotics, and had anticipated a more lenient regulatory environment under the Trump administration. He urged de-escalation, noting that the conflict “put a fly in the ointment of the Trump regulatory framework going forward.”
Musk’s engagement with the government has been a rollercoaster for Tesla investors. While last year saw share prices surge on hopes of a mutually beneficial alliance with Trump, investor sentiment shifted this year as Musk’s association with Trump and his role in controversial spending cuts generated significant backlash and negatively impacted sales, especially in Europe.
Investor apprehension also stemmed from concerns about Musk’s focus, particularly amidst his pursuit of a substantial compensation package and recent reports suggesting the company was seeking alternative leadership. While his pledge to step back from his DogeCoin role and subsequent departure from a government position initially boosted the stock, Tesla is once again embroiled in political controversy.
The current rift with Trump originated from Musk’s criticism of a Trump-backed spending bill, which Musk argued would exacerbate national debt. He has also been vocal in his opposition to Trump’s tariffs, predicting an economic recession in the second half of the year. Trump retorted that Musk’s welcome at the White House was waning, citing Musk’s displeasure over the elimination of an electric vehicle tax credit crucial to Tesla’s US sales.
Further exacerbating tensions was Trump’s decision to withdraw the nomination of Jared Isaacman, a Musk ally, to lead NASA. Thursday’s market decline brought Tesla’s share price to its lowest point since May, erasing gains fueled by hopes of Musk refocusing on company operations. Despite being down 25% year-to-date, Tesla shares remain 60% higher than 12 months ago.
The escalating public feud left investors dismayed. Investor Ross Gerber, who has publicly voiced concerns about the impact of Musk’s political stances on Tesla and reduced his holdings, tweeted, “Can someone please take the phone away from him? Tesla is getting destroyed.”
This event follows a lawsuit filed by Harvard University accusing Donald Trump of orchestrating a “government vendetta” against the institution.
The university’s federal court filing alleges a “vendetta against Harvard” by the Trump administration.
Analysis of the escalating verbal exchange between Musk and Trump, including White House comments and social media posts, is available.
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