Trump and Musk fall out: Institutions harshly evaluate Tesla's prospects, can the U.S. government afford to lose?
The conflict between U.S. President Trump and Tesla CEO Elon Musk has escalated, causing Tesla's stock price to plummet over 14%, with a market value evaporating by more than $150 billion. Wall Street analysts point out that the dispute between the two sides has resulted in a lose-lose situation for Musk's business empire and the strategic industries of the Trump administration. Tesla's stock price recorded its largest single-day drop since 2020, with investors increasingly concerned about the deterioration of the relationship between Musk and Trump
TradingKey - The conflict between former U.S. President Donald Trump and Tesla CEO Elon Musk has escalated into a full-blown public feud, causing Tesla's stock price to plummet over 14%, with a historic market value loss exceeding $150 billion. Wall Street institutions indicate that this is a complete lose-lose situation: Musk's business empire faces uncontrollable risks, and the Trump administration's strategic industries in technology and space are facing significant losses.
After Musk publicly criticized Trump's "Beautiful Law" for two consecutive days, Trump could no longer hold back and retaliated, turning the conflict into a crisis that shocks the capital market and threatens U.S. political and military security.
On June 5, Trump expressed his disappointment with Musk, stating that Musk understands the bill better than anyone but is now opposing it. Musk has become difficult to accept; after canceling the electric vehicle mandate, he has gone crazy.
Musk responded that he is not very clear about the contents of the bill. In response to Trump's threat to cancel government contracts, Musk plans to withdraw from government missions executed by SpaceX's Dragon spacecraft.
The Beginning of Another Collapse in Tesla's Stock Price?
Earlier this year, Musk's political role in DOGE led to Tesla's stock price being halved. Since early April, Tesla's stock price has rebounded strongly by about 50%, but now investors are beginning to worry that the complete deterioration of Musk's relationship with Trump could bring uncontrollable risks to Tesla's prospects.
On June 5, Tesla's stock price plummeted by 14.26%, marking the largest single-day drop since 2020, with Tesla's market value evaporating by $152.5 billion, setting a historical record. At the same time, the world's richest man Musk saw his personal net worth evaporate by $34 billion, marking the second-largest loss in Bloomberg's Billionaires Index history, with the largest loss also being Musk's in November 2021.
【Tesla stock price trend chart, source: TradingKey】
Analysts at Phoenix Financial Services stated that the whole situation is simply ridiculous. Tesla's market value cannot be separated from Musk; Tesla's trading relies on Musk. If Tesla had significant intrinsic value, it would not be plummeting like this now.
Traders pointed out that after the escalation of the conflict between Trump and Musk, institutional investors are conducting large sell-offs.The CEO of Gerber Kawasaki Wealth and Investment Management stated that this is a disaster for Elon Musk, and if the situation continues to deteriorate, it will harm Tesla's earnings.
Analysts have indicated that this adds a layer of complexity for Tesla. Despite sluggish car sales, there is still optimism about Robotaxi boosting Tesla's prospects. However, if Robotaxi also becomes a target of attack, this premium will significantly decrease.
Nevertheless, Tesla long-term bull and Wedbush analyst Dan Ives remains optimistic about Tesla. He stated that this dispute is merely a "fly in the ointment" for the fans of the electric vehicle company.
The U.S. Government Can't Afford to Mess with This
The fallout between Musk and Trump is not just a war of words; Musk has threatened to abandon a crucial part of the U.S. space program by halting SpaceX's Dragon spacecraft missions to transport cargo and personnel to the International Space Station.
Researchers at the Center for Strategic and International Studies stated that without Space contracts, many key functions of the U.S. government that rely on space will experience a massive domino effect, with the Pentagon and NASA being the most critical; currently, there is really no other company that can take SpaceX's place.
Bloomberg economists noted that attacking Musk's companies would threaten the United States' technological leadership, which would be a huge loss. From SpaceX to Grok AI to Tesla electric vehicles, Musk's companies provide the U.S. with competitive advantages in various strategic areas.