The unlikely political marriage between US President Donald Trump and Tech billionaire Elon Musk has ended in a fiery public divorce with Tesla’s shares paying the price. The fallout began after Musk openly slammed Trump’s new tax-and-spending bill on social media. In response, Trump fired back, threatening to cut off government contracts for both Tesla and SpaceX. The political clash added to Tesla’s existing troubles, including slowing electric vehicle demand and Musk’s controversial ties to far-right groups. Since January, the company has lost over $380 billion in market value, making it the biggest loser among one of the major global stocks this year.As a result, Tesla is now the worst-performing large-cap stock of the year, with its market capitalisation plunging by 29.3% to $917 billion according to Reuters report. The company, which ranked eighth globally in market value at the start of 2025, has now slipped to the tenth spot.The White House has since stepped in, reportedly arranging a call with Musk to ease tensions. Despite a small rebound in Tesla shares on Friday, the broader damage appears done.However, when a reporter asked Trump about some media reports that US president has a call scheduled with Musk, Trump said, “You mean the man who has lost his mind?” He added that he was “not particularly” interested in talking to him right now.Meanwhile, Apple has also faced a tough year, falling to the third most valuable company globally. Its $2.99 trillion market cap reflects a 20% drop this year due to slowing demand in China, AI challenges, and renewed trade tensions under the Trump administration.
Tesla shares plunged 14% on Thursday, wiping out over $150 billion in market value, their biggest single-day loss on record, amid a public feud between the two business men. The clash followed Musk’s sharp criticism of Trump’s tax-and-spending bill, which proposes ending the $7,500 EV subsidy by late 2025.The selloff hit broader markets, including Destiny Tech100 Inc, which holds a significant SpaceX stake, falling 13%. Short sellers gained nearly $4 billion from Thursday’s crash, the second-largest single-day profit ever, according to Ortex.However, Tesla shares recovered some ground on Friday. At 9:40 am, the stock climbed 5.2% to $299.46, after Musk appeared open to de-escalating tensions, aligning with investor Bill Ackman’s call for peace.Tesla shares rose 3.7% to close at $295.14, slightly above the 50-day moving average. However, the stock closed the week down 15%, its worst weekly performance since October 2023.Year-to-date, Tesla shares have dropped 22%, making it the worst performer among the “Magnificent Seven” tech stocks, despite remaining the world’s most valuable automaker with a market cap of about $1 trillion. Yet its valuation, 140 times projected earnings, continues to raise concerns amid growing political risks and regulatory uncertainty.
What’s gone wrong between Musk & Trump?
Elon Musk stepped down from his role in the Trump administration last week after pressure from Tesla shareholders. While the split seemed friendly at first, things quickly turned sour. Since his exit, Musk has openly criticised Trump’s key domestic policy—particularly the new tax bill, which he called a “disgusting abomination” on his social media platform, X.
He argued that the bill undermines cost-cutting efforts led by the Department of Government Efficiency (DOGE), a team Musk was closely involved with.In response, Trump accused Musk of being upset over the bill’s removal of electric vehicle (EV) tax incentives and claimed Musk turned against him because their once-friendly relationship no longer served his interests.During an Oval Office address, Trump voiced his displeasure on Truth Social, saying: “The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts. I was always surprised that Biden didn’t do it!”Trump claimed he had asked Musk to leave, citing his decision to remove 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 retaliated on X, claiming credit for Trump’s 2024 electoral success and criticising his ingratitude. The exchange grew more hostile when Musk referenced Trump’s connection to the Epstein files, concluding with “Have a nice day, DJT!”Elon Musk’s other companies like SpaceX and Starlink—leaders in space launches and satellite internet—are now under scrutiny because of his political ties. These businesses often rely on favorable regulatory approvals, helped by Musk’s government connections.Musk, who donated $300 million to Trump’s campaign, claimed Trump’s 2024 win would depend on his support. He later criticised Trump for being ungrateful, backed his impeachment, and warned that Trump’s global tariffs could push the economy into a recession.Tesla shares have seen major ups and downs since Musk endorsed Trump last July. The stock jumped on hopes of reduced regulation for robotaxis but later dropped due to weak sales and backlash over Musk’s political involvement.
What analysts say about the Trump-Musk rift?
Some analysts believe the Trump-Musk rift may not last long, as it could hurt both sides. “It’s a junior high school fight where these best friends are now becoming frenemies,” Dan Ives of Wedbush, a well-known Tesla supporter told Bloomberg.“It’s a Twilight Zone situation for all investors, because the last thing investors want to see is Trump go from a huge supporter of Musk and Tesla to a foe,” he added.Meanwhile, most Congressional Republicans are backing Trump in the fallout. That’s a positive sign for the proposed bill, which could remove a key tax credit of up to $7,500 for buyers of some Tesla and other EV models by the end of this year, seven years earlier than planned.According to JPMorgan, if the bill passes, Tesla could lose about $1.2 billion in profit for the year.According to Paul Stanley of Granite Bay Wealth Management, the public disagreement between Trump and Musk increases Tesla’s political and reputational risks. He notes that ongoing controversy could affect investor confidence and market stability. “Given that inherent powers of the office of the presidency, I don’t see how this could be anything but negative for Tesla and Musk,” he said.
What’s the next major deal for Tesla ?
Tesla faces a significant milestone with its robotaxi service launch scheduled for June 12 in Austin, Texas. This development is crucial for Musk’s strategy to transform the company’s focus towards autonomous vehicles and AI technology.Wedbush’s Ives describes the upcoming robotaxi launch as the “start of the autonomous vision and the next chapter of golden growth,” whilst acknowledging Tesla as “way oversold.” He advises investors to maintain patience.“I still believe that they stay friends and supporters of each other, but this is definitely a little white-knuckle period for Tesla investors,” Ives added.
