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The Story
Picture this: You’re Elon Musk, the world’s richest person, and you’ve just spent $288 million getting Donald Trump elected. Whether driven by political conviction, business pragmatism, or a combination of both, your substantial investment in Trump’s campaign has positioned you at the center of American power. For a few glorious months, the alliance seemed to pay dividends across multiple fronts. Tesla’s stock jumped 45% after Trump’s victory, adding hundreds of billions to the company’s market value—a welcome boost regardless of your original intentions.
Then you called the president’s signature policy bill a “disgusting abomination” on social media.
And just like that, $152 billion of Tesla’s market value vanished in a single day. Musk’s personal net worth dropped by $34 billion—the second-largest single-day loss in the history of Bloomberg’s wealth tracking.
Welcome to the wildest corporate soap opera of 2025, where two of the world’s biggest egos collided so spectacularly that Tesla shareholders are now wondering if they’re holding stock in a car company or a front-row seat to a reality TV show.
But here’s what makes this story truly fascinating: it’s not just about two billionaires having a Twitter spat. It’s about how a single company’s stock price has become divorced from business fundamentals and dependent on the political whims of its mercurial CEO.
But First, Let’s Rewind to Understand How We Got Here
The Musk-Trump alliance might always have been destined to crash and burn, but the build-up was quite something to watch. Think about it—two people who need to be the smartest person in every room, suddenly sharing the same political sandbox. The only surprise is that it took this long to explode.
After Trump’s election victory in November 2024, Elon Musk seemed absolutely unstoppable. His investment in Trump’s campaign had paid off spectacularly. Tesla’s stock price soared as investors bet that Musk’s political connections would translate into favorable policies for electric vehicles and space exploration.
Musk was handed the keys to something called the Department of Government Efficiency—yes, they actually called it DOGE, after the meme cryptocurrency—and was given carte blanche to recommend ways to slash government spending. He was asking to cut budgets left and right, recommending laying off federal employees, and generally playing the role of government efficiency czar with characteristic enthusiasm.
Meanwhile, Tesla shareholders were excited at the thought of all the favorable regulations and government contracts heading Musk’s way. The company’s stock jumped nearly 45% from late April through early 2025, adding hundreds of billions in market value. Musk’s other companies were getting perks too—SpaceX was securing more contracts, and even X (formerly Twitter) was finding it easier to sell debt.
But here’s where the story takes a turn.
The Hidden Trap in Trump’s Beautiful Bill
While Musk was busy playing government efficiency czar, Trump was quietly cooking up a domestic policy bill that would hurt Tesla’s bottom line. And this is where things get really interesting from a business perspective.
Trump’s “big beautiful bill”—as he called it—included provisions that would end the $7,500 federal tax credit for electric vehicle buyers. Now, you might think this wouldn’t matter much for Tesla, given that the company’s cars often cost $80,000 or more. But here’s the thing: that tax credit has been crucial in making Tesla’s vehicles accessible to middle-class buyers who stretch their budgets to go electric.
The bill also proposed ending carbon tax credits that Tesla has been selling to other automakers. These aren’t small change—we’re talking about eliminating programs that could cost Tesla roughly $1.2 billion from the EV tax credit alone, plus roughly another $2 billion from carbon credits. Combined, that’s a potential $3.2 billion hit to Tesla’s operating earnings.
To put this in perspective, Tesla’s total revenue in 2024 was around $96 billion. A $3.2 billion hit to operating earnings would be painful for a company that’s already struggling with declining sales and shrinking profit margins.
But here’s the really crazy part: these provisions had been floating around for weeks, and Tesla’s stock hadn’t moved much. It was only when the Trump-Musk relationship exploded that investors seemed to wake up to the implications.
The Spectacular Meltdown: A Play-by-Play
The breakup played out like a billionaire’s version of a messy divorce, complete with public mudslinging, financial carnage, and plenty of social media drama.
It started when Musk finally read the fine print of Trump’s policy bill and realized his political ally was about to kneecap his biggest business. So he did what Elon Musk does when he’s upset: he went nuclear on social media.
Musk blasted Trump’s policy bill as a “disgusting abomination” and started rallying opposition to it online. Trump, never one to back down from a Twitter fight, fired back by suggesting Musk had “Trump derangement syndrome”—the same phrase he used to describe his Democratic critics.
Musk’s response was the nuclear option: “Without me, Trump would have lost the election.”
Now, whether that’s actually true is debatable, but it’s exactly the kind of claim that usually sends Trump into a rage. The president immediately threatened to terminate Musk’s government contracts and subsidies, calling them “the easiest way to save money in our Budget, Billions and Billions of Dollars.”
The market’s reaction was swift and merciless. Tesla’s stock nosedived 14% on Thursday as investors watched the two of the most powerful people in America tear each other apart on social media. The company lost about $152 billion in market value in a single day—more than the entire market cap of most Fortune 500 companies.
But here’s what’s really telling: Tesla’s stock recovered only slightly on Friday, and when you zoom out, the company’s shares are essentially flat since 2022. A quick glance at the share price history would tell you that Tesla’s stock price has mimicked Musk’s moves rather than its fundamentals.All that political drama, all that hype about Musk’s government connections, and Tesla is right back where it started.
The Government Addiction Problem: Deeper Than You Think
Now, here’s something that might shock you: Elon Musk, known for his championing of free-market capitalism who regularly tweets about cutting government subsidies, has received at least $38 billion in government handouts over the years.
Let that sink in for a moment. Thirty-eight billion dollars. That’s more government support than most countries receive in foreign aid.
But it gets even more interesting when you break down the numbers. Tesla alone has pocketed $11.4 billion from selling regulatory credits to other automakers who don’t meet federal and state environmental standards. These credits are essentially government-created assets that Tesla can sell to competitors who would otherwise face fines.
Here’s where it gets wild: about a third of Tesla’s $35 billion in profits since 2014 has come from these government programs. In 2020, Tesla’s first full year of profitability, the company would have posted a $700 million loss without regulatory credits. Instead, it reported an $862 million profit.
Source: The Washington Post
The federal EV tax credit has been equally crucial. While Musk has publicly called for ending the credit, claiming his competitors need it more than Tesla, the reality is that this $7,500 incentive has probably been instrumental in making Tesla’s expensive cars accessible to regular consumers. Without it, Tesla’s sales would likely take a significant hit.
Then there’s the state and local level support. Nevada gave Tesla a $1.3 billion incentive package to build its battery gigafactory outside Reno. New York threw $750 million at Musk’s SolarCity company, though that didn’t work out as planned. California has provided billions in rebates and tax credits since Tesla’s founding.
Source: The Washington Post
The pattern seems to be clear: at every crucial juncture in Tesla’s growth, government support has been there to seemingly provide a lifeline. The 2010 Energy Department loan helped Tesla survive the financial crisis and launch the Model S. State incentives funded factory construction. Federal programs created the regulatory credit market that has generated billions in revenue.
Now Trump is threatening to cut off the government support, and Musk’s companies are suddenly looking very exposed.
The Business Reality Check: Numbers Don’t Lie
While everyone was watching the political theater, Tesla’s actual business has been quietly declining, and the numbers tell a sobering story.
Sales are plummeting both in the US and internationally. The company’s gross profit margins, which used to be the envy of the auto industry, have been steadily eroding as volumes fall. Tesla’s higher-margin battery business is getting hammered by tariffs on Chinese components. The much-hyped robotaxi program is falling behind competitors like Waymo, which actually has autonomous vehicles operating on public roads.
Analysts have been steadily downgrading their sales expectations for Tesla over the past three years, and they’re now predicting even steeper declines through 2026. The company’s latest quarterly results showed a 71% decline in profit—a drop that would normally send a stock downward.
But here’s what’s really telling: Tesla’s stock has barely reacted to its business problems. The company’s shares have essentially been flat since 2022, despite all the hype about Musk’s political connections and promises of revolutionary new products.
And here’s the really scary part for shareholders: Tesla’s stock price has never been about fundamentals. It’s been about Elon Musk’s ability to spin grand visions and convince investors that Tesla is more than just a car company. It’s about Full Self Driving, robotaxis, energy storage, artificial intelligence—all the moonshot projects that could justify Tesla’s valuation.
But when the CEO is spending his time feuding with presidents instead of fixing manufacturing problems, when he’s more focused on Twitter fights than on beating Chinese competitors, that narrative starts to crumble quickly.
The SpaceX Domino Effect: When Politics Meets National Security
Tesla isn’t Musk’s only company at risk here. SpaceX, which has received $14.9 billion from NASA and $7.6 billion from the Defense Department, suddenly looks vulnerable to political retaliation.
Source: The Washington Post
Trump’s threat to terminate Musk’s government contracts sent concerns through the federal bureaucracy, and for good reason. SpaceX provides the only way NASA can currently fly astronauts to the International Space Station. The company launches sensitive satellites for the Pentagon and intelligence agencies. SpaceX’s Starlink satellite internet service has become crucial for military communications.
Losing these contracts wouldn’t just hurt SpaceX—it could cripple America’s space capabilities and national security infrastructure. But here’s the thing about playing politics with a sometimes vindictive president: when you lose, you lose big.
The threat also highlights just how dependent the U.S. government has become on Musk’s companies. Federal officials are now quietly encouraging other space companies to accelerate their development as potential alternatives to SpaceX, but building rocket capabilities takes years, not months.
The Shareholder Revolt: When Patience Runs Out
Tesla shareholders are finally starting to ask the obvious question: what exactly are they investing in?
The frustration seems to have been building for months. Activist shareholders recently sent a letter to Tesla’s board demanding that Musk devote at least 40 hours per week to Tesla after spending most of the past year focused on politics. The New York City pension system, which holds over 3 million Tesla shares, lost more than $150 million in a single day during the Trump-Musk meltdown.
Some longtime Tesla bulls are throwing in the towel. After watching their investments get whipsawed by Musk’s political adventures, they’re starting to wonder if Tesla can ever succeed as a normal car company focused on building and selling vehicles profitably.
The pension fund managers and institutional investors who’ve supported Tesla through its growth phase are now questioning whether Musk’s political drama is worth the volatility and risk it brings to their portfolios. When you’re managing retirement funds for teachers and firefighters, wild swings based on Twitter feuds aren’t exactly reasonable.
The Regulatory Nightmare: When Your Regulator Becomes Your Enemy
Perhaps the most immediate threat to Tesla’s future comes from the regulatory side. The company’s ambitious plans for Full Self Driving and robotaxis require extensive government approval. The National Highway Traffic Safety Administration recently sent Tesla a letter of inquiry about its robotaxi plans and safety measures—a sign that regulatory scrutiny may actually be intensifying rather than easing.
With Trump now openly hostile to Musk, the likelihood of favorable regulatory treatment has diminished significantly. Federal agencies that might have been inclined to fast-track Tesla’s autonomous vehicle approvals may now take a much more cautious approach.
This is problematic because Tesla’s stock valuation is dependent on investor belief that the company will successfully launch a robotaxi service. Musk has repeatedly promised that Full Self Driving is just around the corner, but regulatory delays could push these ambitions back by years.
The Bottom Line: A Cautionary Tale
The Trump-Musk feud isn’t just political entertainment—some might consider it a masterclass in how not to run a public company, and a cautionary tale about the dangers of tying corporate strategy to political relationships.
Tesla’s stock may have always been more about faith in Elon Musk than faith in Tesla’s fundamentals. The company’s massive valuation—often trading at 50-80 times earnings compared to traditional automakers at 5-10 times, seems to have been justified by Musk’s track record of delivering seemingly impossible innovations.
But when that faith gets shaken by political drama, when the CEO seems more interested in Twitter fights than fixing business problems, when customers start fleeing because they’re tired of the circus—that’s when shareholders may start heading for the exits.
The somwhat tragic part? Tesla actually seems to makes decent cars and has built a legitimate business in electric vehicles. The company pioneered the modern EV market, built a global charging network, and forced traditional automakers to take electric vehicles seriously. But instead of focusing on that business and expanding it profitably, Musk seems to have turned Tesla into a proxy for his personal brand and political ambitions.
The lesson for investors is becoming somewhat clear: when you buy Tesla stock, you’re not just investing in an automaker or even a technology company. You’re investing in whatever Elon Musk decides to do next. And based on the past week, that might not be such a great bet anymore.
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