Trump and Musk in Full Meltdown: Analysts Warn on Tesla Outlook, Can the U.S. Afford to Lose Musk?

TradingKey — The escalating public feud between U.S. President Donald Trump and Tesla CEO Elon Musk has spiraled into a full-blown market crisis. Tesla shares plunged more than 14%, wiping out a record USD 150 billion in market value — the largest single-day loss in the company’s history.

Wall Street analysts have labeled the fallout as a “lose-lose” scenario: Musk’s sprawling business empire now faces heightened uncertainty, while the Trump administration risks undermining key strategic sectors including technology and space exploration.

The conflict erupted after Musk publicly criticized Trump’s newly proposed Beautiful America Act. Trump fired back, turning the spat into a political and economic showdown that has rattled capital markets and raised concerns about national security implications.

On June 5, Trump expressed disappointment with Musk, saying the billionaire — who once had deep insight into the legislation — had turned his back on it. 

Trump said, said: "I'm very disappointed because Elon knew the inner workings of this bill better than almost anybody sitting here. All of a sudden he had a problem."

Musk responded by stating he wasn’t even familiar with the details of the bill. In response to Trump’s threat to pull federal contracts, Musk reportedly considered halting SpaceX’s Dragon spacecraft missions for government operations — a move that could severely disrupt U.S. space capabilities.

Is This the Start of Another Tesla Collapse?

Earlier this year, Musk’s involvement in the DOGE meme culture triggered a sharp sell-off in Tesla shares, which at one point lost nearly half their value. But from early April through May, Tesla rebounded strongly, gaining roughly 50%.

Now, investors are increasingly worried that the worsening rift between Musk and Trump could expose Tesla to unmanageable corporate risk.

On June 5, Tesla shares tumbled 14.26% — the biggest single-day drop since 2020 — erasing USD 152.5 billion in market value. Musk’s personal net worth dropped USD 34 billion that day alone, marking the second-largest daily loss in Bloomberg Billionaires Index history (only surpassed by his own drop in November 2021).

Tesla Stock Price, Source: TradingKey

“The whole thing is idiotic,” said an analyst at Phoenix Financial Services. Tesla’s valuation is inseparable from Musk. The company trades on his persona. If it had real intrinsic value, it wouldn’t be swinging like this.

Traders noted heavy institutional selling following the intensifying feud. “This is a disaster for Musk,” said CEO of Gerber Kawasaki Wealth and Investment Management. If things keep deteriorating, it will directly impact Tesla’s earnings outlook.

One analyst added that the feud introduces an added level of complexity for Tesla. While weak auto sales have been offset by optimism around the upcoming Robotaxi launch, if that project becomes another target of political backlash, investor sentiment could sour quickly.

Still, not all analysts are bearish. Dan Ives, a long-time Tesla bull at Wedbush Securities, remains optimistic. He described the political drama as merely a “fly in the ointment” for Tesla fans.

Can the U.S. Government Afford to Lose Musk?

The breakdown between Musk and Trump goes beyond verbal sparring. Musk has threatened to withdraw SpaceX from its role in critical U.S. space missions, including crew and cargo transport to the International Space Station via the Dragon spacecraft.

A researcher at the Center for Strategic and International Studies (CSIS) warned that without SpaceX, many core U.S. government functions reliant on space would face a domino effect — particularly within the Pentagon and NASA. Currently, no other private company can replace SpaceX’s capabilities at scale.

Bloomberg economists echoed these concerns, noting that targeting Musk-linked companies could jeopardize America’s technological edge. From SpaceX to Tesla and Grok AI, Musk’s enterprises provide the U.S. with a competitive advantage across multiple strategic domains.

As tensions mount, the question remains: Who stands to lose more — Musk or the Trump administration?