Tesla’s record market crash deepens as Trump-Musk fallout shakes investors

Tesla’s record market crash deepens as Trump-Musk fallout shakes investors

Tesla’s market value suffered its worst single-day loss in history on Thursday, plunging by over 14% and wiping $153 billion from the electric vehicle giant’s capitalisation. The sell-off was triggered by US President Donald Trump’s threat to terminate government contracts and subsidies linked to Elon Musk’s companies amid a rapidly deteriorating relationship between the two high-profile figures.

Posting on Truth Social, Trump wrote, “The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts.” The statement sent investors scrambling, ending a volatile day with Tesla shares down 25% for the year so far, the Financial Times reported.

Stock markets shake as feud escalates between former allies

The fallout extended beyond Tesla, with the S&P 500 and Nasdaq Composite both slipping—down 0.5% and 0.8%, respectively—after midday, coinciding with a series of public insults traded between Musk and Trump. Mike Zigmont of Visdom Investment Group described the conflict as a “petulant drama” that unsettled equity markets, though bond markets remained stable.

The timing of the sell-off is especially damaging for Musk, whose companies rely heavily on federal contracts. SpaceX and Starlink, key players in U.S. space and satellite operations, now face uncertainty as Trump hints at retribution. Meanwhile, rivals such as AST SpaceMobile and EchoStar saw their shares rise, gaining 7.5% and 17.4% respectively, as investors sought alternatives in the space sector.

Political fallout and Musk’s controversies hit Tesla’s core business

The breakdown in relations between Trump and Musk comes as Musk faces growing backlash in Europe over his support for far-right political parties, which has coincided with a sharp decline in Tesla sales across the continent. Musk’s brief stint as head of the Department of Government Efficiency also stirred controversy. He resigned in May, citing mounting “blowback” against his businesses.

In a striking assessment earlier this year, JPMorgan analysts warned that Tesla’s sudden drop in value was historically unparalleled: “We struggle to think of anything analogous in the history of the automotive industry.”

Tesla’s rapid decline comes after a rally late last year, when Trump’s re-election initially boosted the company’s stock. But the subsequent trade war and Musk’s increasing political interventions have unnerved investors. Musk’s long-standing unpredictability is no longer being viewed as bold leadership—it’s becoming a liability.

Wall Street braces for the long-term consequences of the split

For investors, the feud signals deeper instability. Renowned short seller Jim Chanos summed up the mood on X: “Most. Predictable. Breakup. Ever.” Tesla’s board, which is reportedly weighing new oversight for Musk, may now face pressure to impose limits on his political entanglements.

The market’s verdict is clear. What began as a high-profile alliance between two powerful figures has now turned into a corporate and political spectacle with very real financial consequences. Whether Tesla can recover investor confidence depends not only on product innovation but on whether Elon Musk can avoid further political fallout.