Deep Dive
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Elon Musk helped finance Donald Trump's return to power with nearly $288 million in donations. Now, less than six months later, Musk is watching that investment destabilize his whole empire.
Now the alliance between the two men began as a mutual beneficial transaction. Musk funneled money into Republican campaigns and super PACs, betting on Trump's reelection to secure policy advantages and also business leverage. Tesla stocks surged after Trump's victory in November. SpaceX faced fewer regulatory hurdles and Musk's influence in Washington reached a new peak.
Now, after a sudden and ugly public fallout, the billionaire is totally exposed. Trump threatened to cancel federal contracts tied to Musk's companies. That threat carries real consequences because Musk relies heavily on government funding and Trump has the tools to interfere.
Now, the White House holds discretionary control over billions in federal contracts and tax credits. Trump reminded Musk of that power in a statement last week, warning of very serious consequences if Musk supported Democrats. Now, Musk hasn't endorsed anyone for 2028.
But he has hinted at starting his own third party. Now, the comment, according to sources close to the administration, irritated Donald Trump, who views political loyalty as transactional. Musk tried to dial things down over the weekend, but deleted a series of attacks he posted about Trump on X. But the damage has already been spreading across Musk's business empire. SpaceX, Tesla,
All feeling it, but Tesla lost $34 billion in market value after the feud became public, according to Bloomberg's Billionaires Index.
The loss is the second biggest single week decline in the index's history. The sell-off erased months of gains and rattled Tesla shareholders, many of whom have grown frustrated with Musk's political distractions. And Tesla's shares are down more than 20% this year, and its quarterly profits fell 71% compared to the same period last year.
Analysts trace the slide to slumping EV demand and political backlash. Trump's new tax plan aims to eliminate the $7,500 EV credit, which is a move that could cost Tesla $1.2 billion in annual revenues, according to J.P. Morgan.
Tesla's financial downturn comes as Musk faces mounting federal scrutiny. The National Highway Traffic Safety Administration recently asked Tesla to provide detailed plans for its robo-taxi launch, citing safety concerns. The company has several active investigations related to its autopilot and full self-driving software going on, and these probes began under the Biden administration, but also remain ongoing under Trump.
And if Trump decides to increase pressure, he has tools to stall permits or ramp up regulatory reviews. That creates more unnecessary uncertainty for Tesla at a moment when investors are already uneasy. Meanwhile, Elon Musk is attempting to shift public focus back to the product side. Tesla is preparing to unveil its RoboTaxi in August this week, and Musk has teased this event on X, claiming the company is now testing self-driving Model Ys on the streets.
He hopes the launch will improve sentiment around Tesla and rebuild investor confidence. But internal pressure is mounting. A coalition of activist shareholders sent a letter last week to Tesla's board chair demanding that Musk commit at least 40 hours per week to Tesla alone. And the group accused him of neglecting his duties while chasing political ambitions and running unrelated businesses.
Brad Lander, who oversees the New York City public pension system, criticized Musk's recent actions after Thursday's Tesla stock drop. The pension fund, which holds more than 3 million Tesla shares, lost over $150 million in one day. Lander, who is also running for New York City mayor, called the feud a disaster and said Musk's political obsession has created direct financial harm to many investors.
His comments reflect growing discontent among institutional shareholders who once praised Musk's risk-taking, but now see it as erratic and also see him as a reckless individual. And beyond Tesla, Musk's other companies face similar threats from Donald Trump. SpaceX relies on federal contracts to launch NASA astronauts and Pentagon satellites. Trump's threat to cancel those contracts sent a chill through SpaceX. Officials said...
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would be logistically difficult. Still, they have started urging competitors to accelerate development as a hedge. SpaceX remains the only active U.S. company with the ability to launch humans into space, but officials say they do not want to be held hostage by one supplier.
Now, analyst Ross Gerber, a longtime Musk supporter turned critic, estimates that SpaceX would lose half its valuation if it lost access to federal money. The company has built a lucrative commercial business, but its more consistent and high paying client is still the U.S. government. Any disruption in those contracts would ripple through Musk's entire operation from Starlink expansion to Starship development.
Gerber also warned that Musk's current behavior is damaging relationships with regulators and customers. He reduced his Tesla stake last week, citing that he called Musk's self-destructive leadership style. And I don't know if you remember this, but at the beginning of Starship development, the FAA and SpaceX were always kind of at odds. SpaceX would be done with a part of the mission so they could fly the actual ship, but it would take the FAA months to
to regulate that one launch. And they went through numerous cycles of a starship in one go from the FAA. So if anything happens with this administration to slow down starship development, that means that SpaceX and NASA won't be getting astronauts to the moon anytime soon if they delay starships. Now, let me let me back this up a little bit. SpaceX will need
To test a hundred starships before they get to the moon, they need to be able to refuel in orbit. They need to be able to orbit the earth properly. They need to be able to get a starship to the moon, land it on the moon. And then take off for the moon into lunar orbit, where they will meet up with another craft in that craft. We'll take the astronauts back down to earth.
Now, if they're slowed down, SpaceX's lander, the lunar starship, the HLS contract starship is slowed down in development cycle. This means that SpaceX probably won't get to the moon in the next six, seven years. And that's not a good thing. SpaceX is on flight 10 next of starship. The last three flights have been a disaster.
There has been explosions of the ship for the last three ship flights. The booster exploded last time because they were pushing it towards its limits and they pushed it past the limits, which was kind of expected, but the ship, they thought they had everything fixed, but apparently either something else was wrong or they didn't have the same problem fixed in the thing exploded. So yeah,
Right now, SpaceX is trying to get back into the cycle of actually testing the ships in orbit.
So they can eventually send it or sorry, sorry to orbital velocity until someday they will make starship in orbit, place it in orbit and they'll orbit the earth a few times and come back down to the ocean probably. So if they can succeed in the next few missions, I can see that happening in the next, within the next five missions. They are also want to do a star link, uh, drop off in space, uh,
And if they get that done, that's a huge step as well, because then they can launch starships and star links at the same time, make money from the star links and also test starships at the same time. So still getting around to that fix on your car. You got this on eBay. You'll find millions of parts guaranteed to fit. Doesn't matter if it's a major engine repair or your first time swapping your windshield wipers.
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The Venmo MasterCard is issued by the Bancorp Bank N.A. Pursuant to license by MasterCard International Incorporated. Card may be used everywhere MasterCard is accepted. Venmo purchase restrictions apply. SpaceX is going to do the next round of testing after the Flight 10, Flight 11, Flight 12, Flight 13. We're expecting bigger things from them, more kind of experimental things from them. Because right now they just have to make it to orbital velocity and make it back down to the Indian Ocean.
But, you know, it's not just about SpaceX or Tesla. Musk has hands in a lot of things. XAI and brain tech firm Neuralink also depend on clear pathways through highly regulated sectors. XAI competes directly with OpenAI, Anthropic, and Google DeepMind, and all of which have relationships in Washington and teams focused on policy compliance. All of those people in those companies compete
Uh, they're kind of quiet. Unlike Elon Musk, who likes to speak his mind and likes to be a free speech absolutist, of course, on X, where he can say anything he wants without repercussions until there are repercussions. And Neuralink, which works on brain computer interfaces, must secure approvals from the Food and Drug Administration and maintain trust with medical institutions.
Any perception of political instability at the top of Musk's empire could delay approvals or dry up strategic partnerships. Now, as those sectors mature, though, policy risks will rise because they're going to be doing more invasive and higher tier things. So the...
Policy risks will not fall. And Trump's campaign aligned closely with Musk throughout 2023 and early 2024. And Trump appointed Musk to lead Doge.
which is an economic advisory panel. And he's invited him to many of his events, invited him to Mar-a-Lago. Tesla was featured prominently during a March White House event celebrating electric vehicles. Trump personally test drove one of the company's red Model Ys, and he still has it at the White House. He says he's not getting rid of it. The public embrace stood in stark contrast to the Biden administration, which consistently excluded Tesla from clean energy events.
Now the change gave Musk and his companies a rare inside track, but that track now looks far more precarious. But it also looks like Elon and Trump may be making up. We're going to keep you abreast of that situation in the few days coming forward. And Musk's original plan was to gain access, reduce regulation, and redirect subsidies towards his businesses.
And that bent unraveled current public feud has not only raised billions in market value for a harder, hardworking people that earn that money to invest in his companies and invest in Elon. Um, now this is the person that once walked into Washington as a King maker. And now he faces potential retaliation from the same system that he tried to game.
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