Tesla Stock Plunges as Musk-Trump Feud Sparks Investor Concerns

Tesla shares nosedived 14% on Thursday, erasing $150 billion in market value, as a public feud between CEO Elon Musk and U.S. President Donald Trump rattled investors. The sharp selloff came despite no company-specific news, with tensions rising after Musk criticized Trump’s tax bill on social media. Trump responded by threatening to revoke Tesla’s government contracts and EV subsidies.

The clash adds uncertainty to Tesla’s future, particularly as the company pivots from electric vehicle sales to autonomous robotaxis. The U.S. Transportation Department, which oversees vehicle safety standards, could influence Tesla’s rollout of self-driving cars—already under investigation for fatal crashes involving its Full Self-Driving software.

Tesla’s political entanglements are now impacting its brand. After Musk backed Trump’s re-election in mid-2024, Tesla stock surged 169% by December but later dropped 54% as public protests and regulatory scrutiny mounted. Industry analysts warn that proposed legislation to end the $7,500 EV tax credit and limit California's emissions mandates could cost Tesla over $3 billion annually.

Despite the turmoil, Tesla remains the world’s most valuable automaker, with a market cap above $1 trillion—far ahead of Toyota’s $290 billion. Still, the company trades at 150 times forward earnings, far exceeding valuations of other tech giants like Nvidia.

Investors and analysts alike worry Musk’s political moves may invite federal retaliation. Critics say Tesla’s reliance on cameras—unlike rivals using lidar—could become a regulatory liability. Musk's leadership of the Department of Government Efficiency (DOGE) and shifting political loyalties have blurred the line between innovation and risk.

"Tesla had the political wind at its back. Now it faces headwinds," said Interactive Brokers strategist Steve Sosnick. Musk’s net worth fell $27 billion to $388 billion in the fallout, according to Forbes.