Tesla’s stock tumbled 6% on Tuesday following a dramatic late-night political spat between President Donald Trump and Elon Musk, coupled with a sweeping Senate rejection of key AI protections that Musk and Silicon Valley leaders had lobbied for.
The slide comes on the heels of Trump’s fiery 12:44 a.m. Truth Social post, where he took direct aim at Musk and the billions in government subsidies that have helped fuel Tesla’s meteoric rise.
“Without subsidies, Elon would probably have to close up shop and head back home to South Africa,” Trump wrote, in a sharp rebuke that stunned Wall Street just as pre-market activity began.
Trump also invoked the now-defunct DOGE task force, which Musk briefly led as part of a tech-government efficiency initiative, suggesting the group “take a good, hard look” at the billionaire’s businesses.
Just hours later, a long-debated proposal to protect AI companies from state-level regulation was stripped from Trump’s “Big, Beautiful Bill” after a 99-1 Senate vote, dealing a further blow to Silicon Valley’s influence in Washington. The amendment, championed by Senator Marsha Blackburn (R-TN), effectively killed a clause Musk had publicly supported.
“This bill is a disaster for innovation,” Musk posted on X Monday night, warning that lawmakers who vote yes “will lose their primary next year if it is the last thing I do on this Earth.”
While Tesla is no stranger to political drama, this latest bout of tension could have real financial consequences. Trump’s evolving stance on green energy subsidies, a vital support beam for Tesla’s business model, has created uncertainty for investors. His current version of the bill includes new taxes on EV companies and increased support for fossil fuels, signaling a potential reversal of federal support for the clean energy sector.
Tesla, which has long benefited from state and federal incentives, could face new hurdles in both regulatory policy and public funding access if the bill passes in its current form.
“Markets are reacting not just to rhetoric, but to actual threats to Tesla’s operating environment,” said Mira Chen, senior equities analyst at Orbit Capital. “If subsidies get pulled back or taxes hit EVs harder, Tesla’s cost structure and demand outlook change.”
Tesla’s stock (NASDAQ: TSLA) closed Tuesday at $198.72, down from $211.40 the previous day. The broader Nasdaq Composite also dipped slightly, though tech leaders like Nvidia and Apple remained relatively stable amid the AI-related legislative uncertainty.
Some analysts have labeled the Tesla pullback a “buy-the-dip” opportunity, betting that the bill will either stall in the Senate or undergo significant revisions. Others are urging caution, pointing to Musk’s increasingly volatile political involvement and the likelihood of sustained headwinds from Washington.
“This isn’t just noise anymore,” said Danielle Brooks, a policy strategist at Oaktree Insights. “Elon Musk has gone from an unofficial advisor to an open adversary of the administration, and that shift carries risk.”
Trump’s “Big Beautiful Bill” is teetering in Congress, with moderate Republicans like Senators Lisa Murkowski (AK) and Susan Collins (ME) now withholding support. If just two more GOP senators vote no, the bill could collapse entirely.
Meanwhile, Tesla and Musk are entering a high-stakes phase where the company’s stock and public image may hinge as much on Washington as on Wall Street.
Bottom line: Tesla investors are navigating political minefields alongside market dynamics, and with Musk’s political threats escalating, the pressure is mounting fast.
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