After the election of Donald Trump, investors poured hundreds of billions of dollars into Tesla stock, banking on the assumption that the political climate would take precedence over the company's profitability. However, in just three hours on a Thursday, investors witnessed the volatility of that decision as Tesla's stock plummeted more than 14%. This abrupt decline resulted in the loss of $150 billion in market value, surpassing the combined worth of major companies like Starbucks and many others in the U.S. stock market.
The turmoil stemmed from a heated exchange between President Trump and Elon Musk, which escalated following a disagreement over a budget bill. Musk controversially remarked that Trump wouldn't have been elected without his influence, prompting Trump to threaten reprisal against Musk's companies, specifically targeting Tesla and SpaceX. In a post on Truth Social, Trump stated, "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!"
This sharp decline on Thursday countered the significant rise in Tesla's stock over the previous eight weeks, a period during which Musk announced the testing of a driverless "robotaxi" service in Austin, Texas. Investors have grown increasingly wary, fearing that Trump's approach to regulation may hinder the rollout of autonomous vehicles. Analysts, including Dan Ives from Wedbush Securities, expressed concern that Trump’s more aggressive stance could delay Tesla’s ambitions—citing that the company hopes to launch robotaxis in 20 to 25 cities next year. "If you start to heighten the regulatory environment, that could delay that path," Ives noted.
Trump's threat appears to be primarily aimed at SpaceX rather than Tesla. SpaceX has benefitted from substantial contracts with NASA, and the company is in a race to develop a mega rocket intended for a lunar mission. Furthermore, Musk's Starlink, a subsidiary of SpaceX, previously enjoyed favorable outcomes from his personal rapport with Trump. Recent developments, such as a deal with Saudi Arabia for aviation and maritime use of Starlink, dwindled apprehensions about political ramifications on Musk's ventures.
Initially, the election of Trump had propelled Tesla's stock, with a rapid increase of over $450 billion added to its value as investors anticipated less regulatory oversight and a supportive stance for Musk's driverless vehicle initiatives. However, after reaching an all-time high on December 17, 2025, Tesla’s shares subsequently retreated. The decline was attributed to Musk's position within a government cost-cutting group that led to public boycotts and a drop in Tesla's reputation. Recently, shares rebounded following Musk's promise to focus on Tesla and its autonomous taxi plans, yet the political climate has renewed uncertainty among investors.
Amidst these developments, Musk personally faced a substantial financial hit, with his Tesla shares dropping in value, resulting in a paper loss of $20 billion for the day. The market's reaction serves as a poignant reminder of the perils intertwined with the intersection of corporate endeavors and political maneuvering.
