I predict that Donald Trump is going to end up being very costly to Elon Musk’s tech empire.
Until quite recently, investors were all in on the Trump-Musk bromance. Bloomberg calculated that the value of Musk’s companies had risen by $613 billion between early November 2024 and mid-February 2025, assuming anticipated funding rounds went as planned. Tesla shares were way up since the election. SpaceX had become the world’s most valuable tech start-up.
Even now there remains abundant enthusiasm for the Trump-Musk duumvirate. Tesla shares have fallen sharply since the start of the year but are still trading above where they were before the election. And banks that lent money to X have been able to sell off some of their loans at or close to their face value, reflecting a huge rebound in investors’ appetite for the company’s debt.
The people investing in these assets seem to figure that Musk will be able to get what he wants for his businesses, such as regulatory relief, because of his tight relationship with Trump. “For Musk, to bet on Trump is a poker move for the ages,” the technology analyst Daniel Ives told Yahoo Finance.
There’s some truth to that. The National Highway Traffic Safety Administration has six pending investigations into Tesla’s self-driving technology, the Associated Press reported. Musk’s companies are also being probed by the Justice Department, the Securities and Exchange Commission, and the National Labor Relations Board. Relief from any of those would help. Musk could also get more business from the government. He said Thursday that a contract for an upgrade of the F.A.A.’s air-traffic control system should go to Starlink, rather than Verizon.
On the whole, though, I think it’s more likely that people will look back at what Musk is up to now and identify it as a historic financial mistake (as well as being bad for democracy, but that’s another story).
I’ll leave it to others to explain the thinking behind Musk’s embrace of Trump and his Department of Government Efficiency. Maybe he truly believes that feeding the federal government into a wood chipper is a great idea.
Whatever the explanation, it’s probably not going to go well for his businesses. Let’s count the ways:
- Musk is not just annoying but enraging the sorts of people who might otherwise be Tesla’s best customers. Only 18 percent of U.S. adults who lean Democrat or liberal said last July that they have a favorable opinion of the company, according to CivicScience. Registrations of new Teslas in the European Union fell 50 percent in January from a year earlier, according to data released February 25. There’s a hot market in bumper stickers that say things such as I bought this before Elon went crazy. The MAGA supporters who do like Musk are less likely to be shopping for an electric vehicle.
- Musk gave $277 million to the campaign of a man who doesn’t even like electric vehicles. Trump has frozen grants to states for E.V. charging stations. He’s trying to overturn a California plan to ban the sale of new gasoline-powered cars in the state by 2035. The Environmental Protection Agency might loosen rules for tailpipe emissions and fuel efficiency. And Trump’s transition team recommended getting rid of the $7,500 consumer tax credit for E.V. purchases. Although Musk has said he’d be happy to see the credit lapse, Wall Street analysts say it would be a blow to the company. “The election (contrary to popular conception) poses significant earnings risk for Tesla—perhaps to the tune of ~40% of its 2024 profits, given the proposed potential removal of various government subsidies for Tesla and its consumers,” JPMorgan analyst Ryan Brinkman and his team wrote on January 3.
- Musk isn’t giving his companies the attention they need because he’s spending so much time in Washington—and on X. “We don’t have a C.E.O. who is fully focused on ensuring that Tesla remains a leader in the E.V. space,” Brad Lander, the New York City comptroller, told The New York Times. Lander oversees pension funds that own $1.25 billion in Tesla shares.
- Musk is agitating for less regulation. If he gets what he wants and unsafe products reach the market, his companies could get hit with expensive tort lawsuits.
- Musk is exposing himself to legal liability with his freelance attacks on government agencies. White House lawyers seemed to be trying to protect him from litigation when they said in a court filing that he was a mere adviser with no decision-making authority. But days later, Trump said he had put Musk in charge of DOGE. If things turn sour, it’s easy to imagine Trump pinning the blame on Musk.
Musk can easily afford any financial hit from his forays into not just domestic politics but global politics, and he really doesn’t seem to care. From the viewpoint of his shareholders and co-investors, that’s precisely the problem: they will care, a lot, if Musk’s alliance with Trump winds up hurting the value of their holdings.
Right now, investors are counting on amazing things happening. Musk’s standing as the world’s richest person is the product of what seem to be unrealistically high valuations on his companies. A good way to see that is by looking at the share price of Tesla in relation to the profits that the company is expected to earn in the coming 12 months—the so-called forward price-to-earnings ratio. For Tesla, that ratio was 95 on February 27. The forward P/E for Apple that day was around 32.
To put it differently, for Tesla to come in line with Apple, its share price would have to fall by two-thirds. Not predicting that, just saying.
Wall Street analysts have given up valuing Tesla by conventional metrics because they keep coming in too low. “Tesla shares continue to strike us as having become completely divorced from the fundamentals,” Brinkman wrote on January 30.
People will look back at what Musk is up to now and identify it as a historic financial mistake (as well as being bad for democracy, but that’s another story).
The divorce from fundamentals is never permanent, however. There are lots of reasons to expect the valuations of Musk’s companies to return to Earth.
Start with Tesla. Aside from the alienation of consumers, Tesla is up against excellent and amazingly cheap models from Chinese competitors, led by BYD. Chinese E.V.’s aren’t available in the United States, but they’re gaining market share in China (the world’s biggest car market) and Europe. Tesla was going to build a cheaper model in Mexico, but last year Musk indefinitely delayed the plan.
He is betting big on driverless taxis powered by artificial intelligence, but some industry analysts are doubtful that they will ever be big moneymakers. And now Tesla is recalling more than 375,000 cars because of an issue with the power steering.
SpaceX, which is valued at around $350 billion, does more launches into space than any other private outfit by far, but its lucrative near monopoly is unlikely to last forever. Rocket Labs, for one, whose Electron rocket is already being used to launch small payloads, plans to test-launch a medium-weight rocket, Neutron, this year. Plus, SpaceX heavily relies on federal contracts that could dry up for various reasons.
X has won back advertisers who don’t want to be on the wrong side of MAGA, so it’s no longer a financial drain on Musk, but neither is it particularly profitable. Musk’s artificial intelligence company, xAI, just introduced an impressive chatbot called Grok 3. On the other hand, it’s entering a crowded market. The Boring Company and Neuralink are too small to matter.
Investors who bet that because Musk is very smart he therefore will always make smart decisions should know better by now. As Mark Cuban once correctly observed, Musk can be his “own worst enemy.” There’s the time he smoked marijuana on a podcast with Joe Rogan, getting him in trouble with NASA. His tweet that he had secured financing to take Tesla private led to $40 million in fines. He sued companies for not advertising on X. His recent odd hand thrusts at a rally looked a lot like Nazi salutes. And now there’s his assault on the federal bureaucracy, which, while not perfect, performs many essential functions.
Kerolox, a potent mix of liquid oxygen and rocket-grade kerosene propellant, is the fuel burned by SpaceX’s Falcon 9 and Falcon Heavy rockets. It’s also a pretty good metaphor for Musk himself. Investor beware.
Peter Coy is a freelance writer, formerly a staff writer at Bloomberg Businessweek and the Opinion section of The New York Times
