Market Reactions Following $152 Billion Loss
vesud – Tesla stock experienced a modest recovery on Friday, regaining nearly 4% after suffering a dramatic plunge that wiped out over $152 billion in market capitalization. The sharp downturn followed a public clash between Tesla CEO Elon Musk and former U.S. President Donald Trump, casting uncertainty over their strained relationship and sparking market anxiety.
The temporary bounce back in share price offered a glimmer of relief to investors, though analysts cautioned that the political tension continues to cloud Tesla’s near-term outlook.
Uncertain Truce Between Trump and Musk
Hopes for a reconciliation briefly surfaced after a Politico report suggested the two might speak later in the day. Musk had earlier indicated on X (formerly Twitter) that he was open to dialogue, even echoing calls for détente from users on the platform.
However, Trump dismissed the idea of a truce during an interview with CNN, saying,
“I’m not even thinking about Elon. He’s got a problem.”
The terse comment underscored the lingering friction, which escalated after Musk criticized Trump’s proposed tax bill—legislation that includes an end to the $7,500 electric vehicle (EV) tax credit by late 2025. In retaliation, Trump hinted at potential cuts to federal contracts held by Musk-led companies, including aerospace giant SpaceX.
Investor Sentiment Wary but Watching
Matthew Britzman, equity analyst at Hargreaves Lansdown and a Tesla shareholder, said the possibility of reconciliation, however slim, could improve investor confidence.
“It might be too hopeful to expect their relationship to return to its former state. But any sign of cooling tensions would be a welcome relief for Tesla and its investors.”
Despite Friday’s gains, Tesla stock remains down 26.9% year-to-date, with a staggering 14% drop on Thursday alone. Even with the slide, Tesla trades at a forward P/E ratio of 120—still significantly above traditional automakers and even some tech giants like Nvidia.
Political Risks Threaten Tesla’s Strategic Ambitions
The fallout from the Trump-Musk dispute isn’t just about share prices—it could have direct consequences on Tesla’s regulatory roadmap. The U.S. Department of Transportation plays a critical role in approving vehicle design standards, including plans for autonomous “robotaxis” without steering wheels or pedals.
Should political hostilities intensify, Musk’s broader business operations, from EVs to aerospace, could face significant policy headwinds.
Tesla did not immediately issue a comment on the latest developments.
Polarizing Politics Could Erode Tesla’s Brand
Musk’s open support for Trump’s 2024 White House campaign had initially buoyed investor hopes, particularly among those anticipating regulatory easing under a GOP administration. Tesla shares saw early boosts based on such optimism.
But the strategy now appears to be backfiring. Sluggish sales and growing backlash over Musk’s political alignment have eroded brand favorability, particularly among liberal consumers. While stronger sales from Republican-leaning customers were once seen as a balancing factor, experts warn that Musk’s recent moves may alienate both sides of the political spectrum.
“With Musk alienating Republicans, there is no one left to prop up consumer sentiment towards Tesla,” said Evan Roth Smith, political strategist and co-founder of Slingshot Strategies. “That could trigger a full-blown collapse in brand perception.”
What’s Next for Tesla?
The path forward for Tesla remains uncertain. Investors are watching closely for any signs of political detente or regulatory threats that could further disrupt operations. For now, the market seems to be holding its breath, hoping that cooler heads will prevail.
