Tesla shares tumbled by more than 14 percent on Thursday, June 5, wiping $150 billion off the company’s market value, following a public clash between CEO Elon Musk and US President Donald Trump that rattled investors and raised concerns about potential government reprisals.
The dispute erupted after a disagreement over the President’s budget bill led to a heated exchange between the two influential figures. On his social platform, Truth Social, Trump threatened to cancel federal and state subsidies and contracts awarded to Musk’s companies, claiming it would be an easy way to cut costs.
“The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts,” Trump posted. “I was always surprised that Biden didn’t do it!”
Tesla currently benefits from billions in US government support, including a $7,500 tax credit for electric vehicle purchases. The threat of termination sparked immediate concern on Wall Street, with analysts warning that the rift could jeopardize Tesla’s future growth.
“The quickly deteriorating friendship and now ‘major beef’ between Musk and Trump is jaw dropping and a shock to the market,” analysts at Wedbush said in a note to investors. “This situation… must start to be calmed down… it’s not good for either side.”
Despite the market jitters, Wedbush maintained a bullish long-term outlook on Tesla, citing confidence in its autonomous driving initiatives. However, analysts acknowledged that the feud has introduced new uncertainty around regulatory stability.
Musk’s proximity to the White House has played a central role in Tesla’s recent trajectory. The carmaker’s shares soared more than 60 percent between Trump’s election in November and the end of 2024. But backlash over Musk’s advisory role and the so-called ‘DOGE department’ prompted investor concern and public protests, leading to Musk stepping back from the position.
Tesla has also faced headwinds in its core business, with disappointing sales figures and brand damage continuing to weigh on sentiment. Yet the promise of AI and automation, particularly a driverless robotaxi pilot set to begin in Austin, Texas, has kept investors hopeful.
“Investing in Tesla isn’t for the faint of heart,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “Musk’s enthusiasm is both a blessing and, at times, a curse… but with such a pivotal few months ahead for the autonomous strategy, investors will want to see Musk give his full attention back to Tesla.”
Richard Hunter, head of markets at Interactive Investor, added that the dispute has broader implications, pointing to growing unease around Trump’s leadership style.
“The latest feud has heightened unease that the President’s seemingly irascible and erratic behaviour is symptomatic of the environment which has been created on a global scale,” Hunter said. “Consumer sentiment is brittle given the wider context of what could be a weakening outlook.”
