Elon Musk Is Back Working With the U.S. Government. Why That Could Be Trouble for SpaceX's Stock

A big reason investors are bullish on the long-term trajectory of Space Exploration Technologies Corp (NASDAQ:SPCX), better known as just SpaceX, is due to its visionary CEO, Elon Musk. Without Musk, I don't believe the stock would have been able to fetch a valuation anywhere near $2 trillion. But with his ability to grow businesses and sky-high expectations for future growth, growth investors are drawn to his companies.

But there have also been times when Musk's role as CEO hasn't been all that great for shareholders. A year ago, when he was working closely with the government, Tesla's stock struggled, largely due to negative press surrounding Musk and questions about his leadership.

Now, Musk is back to working with the U.S. government. Here's why that could be a concerning development for SpaceX investors.

Image source: Getty Images.

Musk appointed to taskforce relating to the future of warfare

Last week, U.S. Secretary of War Pete Hegseth announced that Musk will co-lead a project related to studying the future of warfare, called "Project Meridian." It's planned as a 120-day project aimed at “identifying the capabilities required to achieve absolute technological dominance on the next-generation battlefield."

Musk was previously involved with the Department of Government Efficiency last year, which received significant negative press for its aggressive cost-cutting measures. Musk was seen as the figurehead for that initiative, and his company, Tesla, nosedived amid the drama. From Jan. 20, 2025, through April 30, 2025, the stock fell by 34%, while the S&P 500 declined by a more modest 7%. Musk would ultimately leave the position shortly afterward, and Tesla's stock would end up recovering.

Why SpaceX stock could be more vulnerable

Musk, working closely with the U.S. government, could once again create a ripple effect for his companies. SpaceX, however, with a monstrous valuation of $2.2 trillion, could be much more vulnerable to a significant decline. Unlike Tesla, it isn't profitable. Investors are bullish on the stock's long-term future, and thus a fair degree of speculation is inevitable. If there's a repeat of DOGE and plenty of negative press surrounding Musk's latest initiative with the government, that could once again weigh on his companies, with SpaceX potentially being the most vulnerable due to its high valuation.

This is the type of risk that SpaceX investors need to be cognizant of before buying the space stock, since its value depends more on expectations and Musk's management of the company than on its fundamentals, which don't support the stock's incredibly high valuation. Speculation and volatility are an inevitability with SpaceX, and investors who aren't comfortable with that may be better off sitting on the sidelines.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.