The relationship between Donald Trump and Elon Musk transformed from close alliance to open conflict within hours, shaking financial markets worldwide. Tesla lost an extraordinary $152 billion in market value during a single trading day, while shares plummeted by more than 14 percent. This dramatic turn presents investors with a unique opportunity to acquire undervalued tech giant stocks.
How the Year’s Biggest Clash Began
The conflict erupted over the weekend, just three days after Trump praised Musk as “terrific” at a farewell ceremony and declared he would “always be with us.” Musk began criticizing Trump’s tax package called the “One Big, Beautiful Bill.” Trump responded by threatening to cancel government contracts worth billions of dollars for Musk’s companies. Musk subsequently claimed that “without him, Trump would have lost the election” and announced the immediate decommissioning of the Dragon spacecraft. The dispute quickly shifted from political to personal, with both men questioning each other’s contributions to their success.
The situation escalated on social media, where both men exchanged sharp attacks. Trump called Musk “CRAZY,” while Musk accused the president of ingratitude. Only the intervention of an ordinary X user with the profile @Fab25june and just 184 followers, who wrote “You are both better than this. Cool off and take a step back for a couple days,” managed to convince Musk to partially retreat from the Dragon decommissioning.
Investor and Analyst Reactions to Market Decline
Wall Street reacted immediately and brutally. While Tesla fell 14 percent, Microsoft rose 0.8 percent to record highs and once again became the world’s largest company by market capitalization. The Nasdaq Composite dropped 0.83 percent, showing the broader impact on the technology sector. Key observations from leading analysts:
- Dan Ives from Wedbush: Called the conflict “jaw-dropping for the market” and warned of long-term impacts on Tesla’s autonomous technologies
- Ross Gerber: Criticized Musk for “attacking the people he helped put in power”
- Gary Black from Future Fund: Argued that the Musk-Trump alliance was crucial for obtaining fully autonomous driving licenses
Billionaire Bill Ackman urged both men to “make peace for the benefit of the country,” while former Trump advisor Steve Bannon proposed government takeover of SpaceX through the Defense Production Act. The reactions show how divisive Musk’s role in American politics has become.
Investment Strategies During Political Uncertainty
Current volatility creates several investment opportunities for savvy investors. It’s important to understand that similar political conflicts have historically created temporary declines, followed by corrective rebounds:
Declining tech stocks: Tesla isn’t the only company affected by political uncertainty. The conflict has also impacted Musk’s other ventures including Neuralink, xAI, and Boring Company, whose valuations are declining due to uncertainty about future government relations. Investors can leverage the decline to purchase quality tech stocks at a discount.
Space industry: SpaceX remains the dominant player with $20 billion in contracts from NASA and other agencies. Dragon is currently the only American option for crew transportation to the International Space Station, making Musk’s decommissioning threat practically unrealizable.
Portfolio diversification: The current situation demonstrates the importance of risk distribution across different sectors and geographical areas.
Long-term Market Impact
Analysts warn of several scenarios:
- Slower regulatory processes for Tesla’s autonomous vehicles
- Possible interruption of government contracts for SpaceX
- Formation of a new political party “for the 80% in the middle,” as proposed by Musk
- Strengthening of competing technology companies
David Rosenberg from Rosenberg Research points out that the conflict could threaten American dominance in space technologies, where SpaceX provides a “huge advantage.”
Opportunity for Active Investors
Historically, similar political conflicts have created short-term stock price declines, followed by strong recoveries. Investors with long-term horizons can use the current situation to:
- Gradually build positions in technology leaders
- Utilize dollar-cost averaging strategies
- Focus on companies with diversified revenue streams
- Monitor regulatory changes and their impacts
As Ian Bremmer from Eurasia Group noted: “Trump is more powerful than Elon, but far less competent.” This dynamic suggests that the current conflict may be temporary, but its market impacts will be long-lasting.
