For investors who had poured hundreds of billions into Tesla stock post-Trump's election, betting on political favor to trump traditional financial metrics, Thursday served as a harsh reminder of the inherent risks. The dispute ignited over the president's budget bill but quickly escalated into a personal war of words. Musk's claim that Trump wouldn't have won without his assistance drew a swift and sharp retort from the former president, who implied potential government action against Musk's enterprises.
"The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts," Trump declared on his social messaging service, Truth Social. "I was always surprised that Biden didn’t do it!" This public threat sent shockwaves through the market, translating into a massive paper loss for Musk himself, whose personal Tesla holdings saw a $20 billion decline by day's end.
The substantial drop partially erased a significant rally Tesla had enjoyed in the preceding eight weeks. This surge was fueled by Musk's confirmation that the company would be testing an autonomous, driverless "robotaxi" service in Austin, Texas, this month. However, Trump's pronouncements have introduced a chilling uncertainty.
Investors now fear that a potentially hostile regulatory environment under a future Trump administration could significantly impede the rapid deployment of self-driving cars in the U.S. This prospect is particularly concerning for Tesla, whose core electric car sales are currently facing headwinds, making the successful and swift realization of its robotaxi vision crucial for its future growth and valuation.
Dan Ives, a prominent Tesla analyst at Wedbush Securities and a long-time admirer of the company, expressed newfound concern. "The whole goal of robotaxis is to have them in 20 or 25 cities next year," Ives stated, adding, "If you start to heighten the regulatory environment, that could delay that path." He concluded with a palpable sense of apprehension: "There is a fear that Trump is not going to play Mr. Nice Guy."
While the immediate market reaction hit Tesla hardest, Trump's threat to cut government contracts appears to be primarily aimed at another of Musk's ventures, SpaceX. The privately held rocket company has secured billions of dollars in contracts for its work with NASA, including sending astronauts and cargo to the International Space Station and developing a mega rocket for lunar missions. SpaceX's subsidiary, the satellite internet company Starlink, has also reportedly benefited from Musk's past rapport with the former president.
A recent trip with Trump to the Middle East saw Musk announce Saudi Arabia's approval of Starlink for aviation and maritime use, amidst a string of other international deals for Starlink as Trump's administration employed tariff threats and diplomatic pressure. The success of SpaceX is evident in its reported $350 billion valuation from recent private financing and share sales, a substantial jump from $210 billion just a year ago – all now potentially jeopardized.
Indeed, Tesla shares had initially enjoyed a significant boost from Musk's close relationship with Trump. Following the presidential election in November, investors rapidly acquired the stock, adding over $450 billion to its value in a matter of weeks. The prevailing belief was that a Trump administration would ease regulatory oversight on Tesla and enthusiastically embrace Musk's ambitious plans for millions of driverless cars on U.S. roads.
However, after hitting an all-time high on December 17, Tesla shares began to retreat as Musk's brief stint as head of a government cost-cutting group led to boycotts and a dent in Tesla's reputation. A recent resurgence in share price was spurred by Musk's renewed focus on Tesla and the impending robotaxi launch.
Now, with the specter of political animosity looming large, investors are no longer as confident, and the market has responded with a dramatic reassessment of Tesla's future trajectory. The events of Thursday serve as a stark reminder that even for companies at the forefront of innovation, political headwinds can be a formidable, and costly, force.