Elon Musk officially wrapped up his (in)directorship in the Trump administration at the end of last month. This decision sparked a chain reaction that has shaken Tesla investors. Once heralded as a key adviser to former President Donald Trump, Musk’s foray into government has proven tumultuous, leading to significant volatility for Tesla’s stock. It’s a shame he’s chosen to depart the administration on this note. This latest move wouldn’t be surprising in that context, especially given that tensions between him and Trump have been escalating.
Not to mention that Musk counseled Trump and headed up the Department of Making Government Go Fast. As important as his role was, it became increasingly controversial. During his time in office, he became the poster child for cuts to government spending that earned the ire of everyone from teachers to firefighters. This anger has supposedly damaged Tesla’s sales, getting hit particularly hard in Europe. As Musk seeks to rally opposition against government policies, he argues that proposed spending initiatives would inflate the national debt.
In recent statements, Musk has expressed concerns over Trump’s tariffs, foreseeing an economic recession in the latter half of the year. This isn’t the first time his criticisms have driven a wedge between him and Trump. This tension reached a breaking point after Musk blasted a spending bill backed by Trump. Trump’s last-minute withdrawal of Jared Isaacman’s nomination to head NASA further deepened the breach. Musk viewed this action through a hostile lens.
The monetary impact of this drama has already shown immediate effects on Tesla’s bottom line after the annual stockholder meeting. On what would turn out to be one of its worst trading days in months, shares of Tesla plummeted by 14%. That rapid decline resulted in a stunning $150 billion loss of market cap. Tesla’s board chairman promptly shot down the rumor. At the time, he claimed that the company was not looking for a replacement CEO amid the fall.
Wedbush analyst Dan Ives called Musk’s showdown with Trump “jaw-dropping.” He acknowledged that the event was a jolt to the market. The conflict has investor alarm bells ringing as they look to understand what this means for Tesla and how it will affect the company’s path forward.
Additionally, Trump himself has spoken out against Musk’s recent moves, indicating that Musk’s favor at the White House is quickly evaporating. He slammed Musk for being “mad” that the tax credit for electric vehicles got taken out. In addition, Biden threatened to sever government contracts with Musk’s companies, including SpaceX, which currently has contracts worth up to $100 billion.
Musk’s recent pledge during an investor call to step back from his leadership role with Dogecoin saw a temporary uptick in Tesla’s stock. This was a victory, but it was short-lived, as the larger ramifications of his continued Trump feud proved to be more enduring.
Ross Gerber, a prominent Tesla investor, echoed the sentiments of many in the investment community, stating, “Can someone please take the phone away from him.”