Political feud reignites investor fears as Musk's robotaxi plans run into uncertainty with Trump
Tesla shares plunged more than 14 percent last Thursday, wiping out US$150bn in market value, after Elon Musk's public clash with US President Donald Trump raised investor concerns over future regulatory and funding risks, according to The Canadian Press.
As reported by CNBC, Trump warned Musk of “serious consequences” if he supported Democratic candidates opposing a Republican spending bill backed by the president.
Trump also claimed to have “saved [Musk’s] life” during his first administration and confirmed he had no plans to speak with Musk again.
The president further stated that Musk had been “disrespectful to the office of the president.”
Tesla’s sharp drop partially erased a 40 percent rally that had built since April, fuelled by optimism around Musk’s pledge to refocus on Tesla and launch a robotaxi service in Austin, Texas.
Investors grew anxious that Trump may not support self-driving initiatives under a renewed regulatory lens, a concern with potential implications for Tesla’s future growth.
Dan Ives, an analyst at Wedbush Securities, told The Canadian Press that “the whole goal of robotaxis is to have them in 20 or 25 cities next year. If you start to heighten the regulatory environment, that could delay that path.”
Ross Gerber, CEO of Gerber Kawasaki Wealth & Investment Management, told Yahoo Finance that the value of Tesla and SpaceX had become heavily dependent on political perception rather than business fundamentals.
“This is a disaster of epic proportion for Tesla and SpaceX,” he said. Gerber, whose firm holds 235,000 Tesla shares, added, “I think we're just getting started for the declines.”
Tesla shares recovered slightly in after-hours trading, rising 0.8 percent on Thursday, and finished Friday up 3.7 percent after touching a 6 percent intraday gain as tensions appeared to ease, according to Yahoo Finance.
The political rift began after Musk denounced Trump’s GOP-backed budget proposal.
On a now deleted post on X, Musk called it a “disgusting abomination” and added, “Shame on those who voted for it: you know you did wrong.”
The bill includes provisions that would eliminate EV tax credits, which Gerber described as a potential “death blow” to Tesla’s sales.
Trump responded by threatening to terminate government subsidies and contracts awarded to Musk’s companies.
He wrote on Truth Social, “The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts.”
Source: @realDonaldTrump via Truth Social
He added that he was “always surprised that Biden didn’t do it.”
SpaceX, Musk’s privately held aerospace firm, faces additional exposure.
As reported by The Canadian Press, the company has received billions for work with NASA, including missions to the International Space Station and the development of a mega rocket intended to send astronauts to the moon next year.
Starlink, a subsidiary of SpaceX, also continues to expand globally.
Musk announced last month during a trip with Trump to the Middle East that Saudi Arabia had approved Starlink for aviation and maritime use.
Recent deals in Bangladesh, Pakistan, and India have also aligned with Trump’s global diplomacy efforts.
According to private valuations reported by The Canadian Press, SpaceX recently rose to US$350bn from US$210bn a year ago following a financing round and share sale.
Tesla’s rally following Trump’s election in November added US$450bn in value, based on expectations of regulatory leniency and an accelerated push toward autonomous vehicle deployment.
However, as Musk’s role leading the Department of Government Efficiency (DOGE) drew criticism, Tesla faced boycotts and reputation damage.
Musk officially exited DOGE last month and shortly after resumed criticism of Trump’s economic policies.
The political fallout has raised questions about Tesla’s dependence on favourable government treatment, a key consideration as the company prepares for its robotaxi rollout.
Craig Irwin, a senior analyst at Roth MKM and a Tesla shareholder, expressed optimism about the company’s long-term potential.
“The political noise and the other volatility is more short term in nature, at least as far as I see it,” he told Yahoo Finance. “Their interests are still incredibly well aligned... I think cooler heads prevail.”
Adam Jonas of Morgan Stanley maintained an Overweight rating and a US$410 price target on Tesla, citing long-term confidence in its autonomous vehicles, robotics, and communications infrastructure.
Jonas stated, “We believe the challenges facing Tesla’s current business are widely reported and well known, while the opportunities in the future business are potentially greatly underestimated.”
According to The Canadian Press, Musk’s personal holdings in Tesla declined by US$20bn during Thursday’s selloff.
