The once-surprising alliance between U.S. President Donald Trump and tech billionaire Elon Musk has disintegrated in spectacular fashion, triggering political ripples and financial turmoil. The split became public after Musk launched a fierce critique of Trump’s new tax-and-spending bill on social media, labelling it a “disgusting abomination.” The bill proposes ending the popular $7,500 federal tax credit for electric vehicles (EVs) by late 2025—an incentive that has significantly benefited Tesla.
Trump swiftly retaliated, threatening to sever government contracts with both Tesla and SpaceX. The President went further during an Oval Office address posted on Truth Social, stating: “The easiest way to save money in our Budget—Billions and Billions of Dollars—is to terminate Elon’s Governmental Subsidies and Contracts. I was always surprised that Biden didn’t do it!”
The political drama couldn’t have come at a worse time for Tesla. Already battling slowing global EV demand, regulatory scrutiny, and Musk’s controversial associations with far-right circles, the company has now seen its market value nosedive by over $380 billion since January 2025. Tesla shares dropped 14% on Thursday alone—their largest single-day loss ever—wiping out over $150 billion. The ripple effect also hit Destiny Tech100 Inc., which holds a major stake in SpaceX, sending its stock down 13%. According to Ortex, short sellers netted close to $4 billion in profits from Thursday’s collapse—one of the largest single-day gains ever.
Although Tesla shares rebounded slightly on Friday—rising 5.2% to $299.46 at market open before closing up 3.7% at $295.14—the damage to investor confidence was evident. The stock ended the week down 15%, its worst performance since October 2023. Year-to-date, Tesla shares are down 22%, making it the worst performer among the elite “Magnificent Seven” tech stocks. Once ranked eighth globally by market capitalisation, Tesla has now slipped to the tenth spot, with its valuation sitting precariously at around $917 billion.
Musk’s exit from the Trump administration last week, reportedly due to mounting shareholder pressure, initially seemed amicable. But it quickly descended into acrimony. The Tesla CEO, once part of the Department of Government Efficiency (DOGE), accused Trump’s new bill of undermining fiscal discipline. Trump, in turn, dismissed Musk’s criticisms as self-serving, hinting that Musk had turned on him because their alliance no longer benefited him.
Amid mounting backlash and investor concern, the White House has reportedly tried to mediate, with insiders suggesting a call between Musk and senior officials to de-escalate tensions. However, when asked by a reporter about this potential dialogue, Trump snapped: “You mean the man who has lost his mind? I’m not particularly interested in talking to him right now.”
Meanwhile, Apple has also been caught in the tech-sector downturn. The iPhone maker has slipped to the third most valuable global company, with a $2.99 trillion market cap reflecting a 20% decline this year. The fall is attributed to weakening demand in China, AI implementation struggles, and renewed trade tensions under Trump’s leadership.
While Musk has shown signs of willingness to make peace—echoing investor Bill Ackman’s call for a truce—the future of Tesla’s government partnerships and long-term valuation remain clouded by political uncertainty. The feud has not only strained two of the most powerful men in America but has also shaken investor faith in Tesla’s resilience amid rising political risks.
