Tesla’s Tumultuous Week - Political Feud Shakes Confidence, Long-Term Outlook Steady

Tesla shares plunged 14.2% on Thursday, erasing $152 billion in market capitalization. The sharp selloff was triggered not by deteriorating fundamentals or a product recall, but by a highly public and personal political feud between CEO Elon Musk and President Donald Trump. Once close allies, the two men exchanged heated remarks and provocative comments, with Trump vowing to cut off federal contracts to Musk’s companies, while Musk called for Trump’s impeachment and accused him of political betrayal. The fallout has significantly clouded Tesla’s short-term outlook, shaking investor confidence and raising concerns about the impact of political risk on corporate valuations.

The timing of the feud could not have been worse. Tesla is preparing for a high-profile launch of its long-delayed robotaxi initiative in Austin next week—a product Musk has described as central to the company’s autonomous future. However, that future depends heavily on regulatory approvals, many of which fall under federal jurisdiction. Trump’s threats to pull subsidies and impose new fees on electric vehicle buyers add uncertainty to Tesla’s policy environment, while renewed safety concerns surrounding its Full Self-Driving software, fueled by resurfaced footage of a fatal crash, complicate its ambitions in autonomy.

The scale of the stock decline also highlighted Tesla’s broader influence on equity markets, as one of the most heavily weighted constituents in the S&P 500 and Nasdaq 100. Its sharp selloff accounted for nearly half of the decline in both indices on Thursday. Retail investors moved quickly to buy the dip, with Tesla remaining one of the most actively traded stocks.

FOREIGN MARKETS

Tesla has seen slowing momentum in key markets like China and Europe, where competition is intensifying and consumer sentiment toward Musk’s political persona has cooled. The company’s image, once centered around innovation and sustainability, is increasingly being shaped by Musk’s personal actions—actions that may alienate potential buyers and regulators alike. The company’s modest rebound on Friday, with shares rising 3% as tensions between Musk and Trump appeared to cool, reflects hopes for de-escalation. Yet even a temporary truce does not remove the underlying risks. As long as Tesla’s valuation remains tightly coupled to Musk’s personal thoughts and actions, episodes of volatility driven by non-operational events may continue.

TESLA and MUSK

Tesla’s technological edge in battery integration, AI, and vehicle software remains substantial. Its vertically integrated manufacturing model delivers structural advantages, and its position in next-generation mobility remains a differentiator. But this week’s events make one thing clear: for better or worse, Tesla is inseparable from Elon Musk— a double edged sword that brings both opportunities and risks.