Musk-Trump Messy Breakup Wipes Out $150B in TSLA Stock: What's Next?

Well, they didn’t exactly seem like besties forever, but neither did we expect things to get this ugly between Elon Musk, the richest man in the world and Tesla’s TSLA CEO, and US President Donald Trump. In fact, this power duo shared a warm relationship even till last week. They shared private meetings, mutual praise and even a public Oval Office send-off celebrating Musk’s short-lived role at the Department of Government Efficiency (DOGE). But the bromance has soured—and how! A fallout that’s now grabbing international headlines and rattling markets.

At the center of it all is Trump’s newly proposed “Big and Beautiful” budget bill. Musk slammed the bill, calling it a “disgusting abomination” and warning that it could lead to a massive budget deficit. Trump didn’t hold back either, calling Musk “crazy” and threatening to axe the government contracts that have long supported Tesla and SpaceX. “The easiest way to save billions,” he wrote on Truth Social, “is to terminate Elon’s governmental subsidies and contracts.”

Musk fired back on X: “Go ahead, make my day.”

The public back-and-forth marks a sharp shift from the days they showered praises on each other. Musk is now calling out Trump’s “ingratitude” and claiming, “Without me, Trump would have lost the election.”

But this isn’t just a political soap opera—it’s a market-moving feud. Tesla stock cratered 14% on Thursday, erasing over $150 billion in market value in a single day — its worst on record. Shares have now plunged more than $237 billion over the last five sessions, with the price slipping below key technical levels like the 50- and 200-day moving averages.

TSLA Stock Falls Below Key Technical Levels

So, what’s next for investors? Is this a buying opportunity—or a dip to avoid amid the sharp fallout?

Musk Leaves DOGE, But Tesla’s Troubles Grow

Just when investors started breathing a sigh of relief, thinking Elon Musk’s exit from DOGE would bring his focus back to Tesla, things took a turn for the worse. Ironically, his time in DOGE hasn’t helped Tesla either way—and may have only deepened its troubles.

When Musk was in Trump’s good books, his growing political profile sparked backlash. His involvement in government work stirred up public sentiment and triggered acts of vandalism at Tesla dealerships and Supercharger stations across the country. What started as political protests quickly turned into broader anti-Musk sentiment, hitting Tesla’s brand image.

Now that he’s stepped away from DOGE—and more importantly, fallen out with the president—Tesla could be facing an even steeper uphill battle. Musk’s feud with the White House might worsen things for Tesla.

At the heart of the issue is the budget bill’s plan to eliminate EV tax credits. These incentives have long supported Tesla’s growth and are crucial as the company navigates rising competition. Tesla has spent heavily — more than $240,000 as of late April — lobbying to protect those credits. Now, with the bill moving forward and Musk out of favor in Washington, those efforts may come up short.

And the timing couldn’t be worse. Tesla’s EV sales are already under pressure. While Tesla’s momentum slows, Chinese EV giant BYD Co Ltd. BYDDY is surging ahead. In first-quarter 2025, BYD outsold Tesla in battery EVs for the second straight quarter, strengthening its lead as the world’s top EV maker. With aggressive expansion and cutting-edge tech, BYD poses a serious threat to Tesla’s long-held dominance. In China, Tesla sales fell 15% year over year in May to 61,662 units, marking the eighth straight month of decline. In Europe, sales dropped for the fifth month in a row.

Tesla Robotaxi Dreams at Risk?

Beyond tariffs and the possible loss of EV tax credits, Musk’s fight with Trump could pose even bigger problems for Tesla. If Trump makes good on his threats to cut federal support, it could derail Tesla’s high-stakes robotaxi ambitions, just days before its planned rollout. The company is already lagging behind Alphabet’s GOOGL Waymo and other competitors. Alphabet’s Waymo leads the U.S. market with commercial services in four cities and over 250,000 paid rides per week. Alphabet is doubling down, pledging $5 billion toward Waymo’s expansion.

Tesla, meanwhile, is still under scrutiny. The National Highway Traffic Safety Administration has ongoing investigations into Autopilot and Full Self-Driving, which are linked to multiple fatal crashes. With the full weight of the federal government behind him, Trump could turn up the heat. As President, he has the power—and a track record of using it—to go after perceived enemies. For Tesla, it might be an even rougher road ahead.

How to Play TSLA Stock Now

Valuation-wise, the stock still trades at a steep premium, much of which seems driven by early enthusiasm around its yet-to-be-proven robotaxi ambitions. But with political heat rising and regulatory threats looming, the road to autonomy looks bumpier than ever. The stock carries a Value Score of F.

The Zacks Consensus Estimate for Tesla’s 2025 EPS suggests a 22% year-over-year decline, and revisions have been trending lower.

At this point, not much seems to be working in Tesla’s favor. With Musk now at odds with the President, the stock has become politically sensitive, and that’s likely to fuel increased volatility. Caught in the crossfire of ego and power, Tesla could see more downside before any meaningful recovery takes shape.

This may eventually shape up to be a buy-the-dip story—but not yet. For now, the smarter move is to sit this one out and watch from the sidelines.

Tesla currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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