Assessing the Musk Empire's Government Dependence Through a Major Investor's Lens

The most telling signal of a structural risk is not a market dip, but a seasoned investor's decisive retreat. For Ross Gerber, the CEO of Gerber Kawasaki Wealth & Investment Management, the warning has been clear for months. His firm's recent actions and stark commentary frame a material valuation threat that extends far beyond any single stock. Gerber has characterized Elon Musk's public feud with President Trump as a "disaster" for the Musk empire, and his analysis points to a concrete financial consequence: "SpaceX's valuation was probably cut in half today because of this behavior." This is the core thesis. The risk is not hypothetical; it is the direct, quantifiable exposure of a private company with massive government contract dependence to the volatility of a public political feud.

Gerber's bearish conviction is not limited to SpaceX. He has made a prescient and aggressive call on Tesla, the public face of the Musk empire. In late February, he predicted the stock would fall 50% in 2025. His view has only hardened, as he now sees no clear path for a rebound this year. This is a fundamental re-rating of the company's growth story and risk profile. The warning is backed by action. Regulatory filings show Gerber's firm reduced its Tesla stake by 31% in 2024, leaving it with 262,000 shares worth $106 million at year-end. This is a strategic exit, not a tactical trade.

The bottom line is a warning about concentration and external vulnerability. Gerber's analysis exposes a structural risk: the immense value of companies like SpaceX is tethered to a political relationship that has now turned adversarial. For Tesla, the risk is a combination of valuation, execution, and brand dilution. The investor's move is a vote of no confidence in the current trajectory. When a long-time bull turns skeptic and trims his position decisively, it signals that the market's near-term pain may be just the beginning of a deeper revaluation.

The Scale of Government Support: A Decade of Dependence

The recent public feud between Elon Musk and President Trump has spotlighted a structural reality: the immense, decades-long dependence of his companies on public funds. This is not a peripheral subsidy but a foundational pillar of their growth. A Washington Post analysis reveals that Musk and his businesses have received at least $38 billion in government contracts, loans, subsidies and tax credits over more than two decades. The pattern is one of escalating reliance, with nearly two-thirds of that total promised in the last five years. In 2024 alone, federal and local governments committed at least $6.3 billion to his companies, the highest annual total to date.

This dependence is most acute for SpaceX. Since 2008, the company has been awarded over $20 billion in government contracts and funding commitments. Its financial model is now deeply intertwined with federal agencies. For its projected $15.5 billion in 2025 revenue, a significant $1.1 billion is expected to come from NASA alone. The company's dominance in launch services, including its critical role in ferrying astronauts to the ISS, has made it an indispensable utility for the U.S. government. This creates a powerful, reciprocal relationship where taxpayer money funds the infrastructure that enables national space ambitions.

Tesla's history is similarly defined by regulatory support. The company has earned $11.4 billion in regulatory credits from federal and state programs since 2019, a figure that experts say was a key profit driver. This financial lifeline was recently eliminated when the government ended both the subsidies and the fines that incentivized automakers to buy these credits. The move underscores how much of Tesla's early profitability was artificially inflated by this policy mechanism, separate from its core automotive sales.

The bottom line is a paradox of modern industrial policy. Musk's ventures have pioneered new markets for the government-space exploration and electric vehicles-while simultaneously becoming critically dependent on the very programs they helped create. This structural risk is now in the open, as the Trump-Musk standoff has shown that the government's ability to cut off this funding is a tangible, leveraged threat. For investors, the valuation of these companies must now account for this embedded vulnerability, even as their operational dominance continues to grow.

The Catalyst: A Political Standoff with Financial Consequences

The immediate trigger for this high-stakes standoff is a public feud between two of the world's most powerful figures, but its financial consequences are already materializing. President Trump's recent threat to terminate Elon's Governmental Subsidies and Contracts is a direct attack on the business model of SpaceX, which relies on billions in federal work. Musk, in turn, responded with a retaliatory threat to decommission its Dragon spacecraft immediately. This exchange moves from structural risk to an actionable threat, highlighting the government's deep dependence on a single private contractor for critical space operations.

The financial shock for SpaceX is quantifiable. Musk has disclosed that the company is projecting $15.5 billion in revenue for 2025, with $1.1 billion coming from NASA contracts alone. Any loss of this government revenue stream would be a severe blow to a company that has received over $20 billion in contracts from federal agencies since 2008. The threat is credible because the government has no immediate alternative; SpaceX is the only operational U.S. vehicle for crewed spaceflight and a key cargo supplier to the International Space Station.

The fallout extends directly to Tesla, Musk's other major public company. The loss of the federal EV tax credit and the elimination of regulatory credit penalties are creating a dual revenue shock. Analysts project that the loss of regulatory credit sales will result in a direct hit to profitability and anticipate demand for these credits to fall by around 75% in 2026. This revenue stream, which has brought in nearly $12 billion over the past decade, has been foundational to Tesla's financial model. The company's recent earnings already show the pressure, with adjusted income falling 29% year-over-year in the third quarter, a drop that analysts attribute partly to the fading tax credit and regulatory credit sales.

The bottom line is a cascading risk. The political standoff creates uncertainty for SpaceX's government contracts, a critical revenue pillar. Simultaneously, the policy changes Musk has championed are dismantling key profit drivers for Tesla. This is not a distant threat; it is a present-day financial reality where the CEO's political actions are directly undermining the financial health of his companies.

Valuation Implications and Forward Scenarios

The financial fallout from Elon Musk's public feud with President Trump is now a tangible risk for two of his most valuable companies, creating a stark divergence in their near-term paths. For SpaceX, the threat is to its impending public valuation. The company is preparing for a potential IPO in 2026, with a recent secondary sale valuing it at $800 billion. A major investor, Ross Gerber, argues this valuation is now in jeopardy. He told Bloomberg that Musk's behavior has likely cut SpaceX's valuation in half today. The logic is straightforward: SpaceX's business model is heavily reliant on government contracts, and the president's recent threats to terminate those subsidies create a direct, material risk to the company's future cash flows. While the impact may be delayed for a private company, the damage to its perceived value and future funding prospects is immediate.

For Tesla, the financial impact is already visible in the stock price. The shares have crashed 48% since peaking in mid-December, a brutal correction that has validated the bearish call of investors like Gerber. Yet even after this steep drop, the valuation remains a critical problem. The stock still trades at a forward price-to-earnings ratio of 65, a multiple that Gerber finds impossible to justify. He argues the path to recovery is blocked by a fundamental issue: Tesla's products have become too good. This "Apple problem" means cars last for years, killing the repeat demand cycle that fuels growth. Without a clear earnings growth story to support its valuation, the stock lacks a catalyst for a sustained rebound.

The bottom line is a bifurcated risk. SpaceX faces a potential de-rating of its pre-IPO valuation, while Tesla grapples with a valuation that has not caught up to its deteriorating growth narrative. For investors, the scenario is one of delayed pain for SpaceX and persistent overvaluation for Tesla, with both companies caught in the crosshairs of a billionaire's political entanglement.

Catalysts and Risks: What to Watch

The structural risks facing these two Musk-led giants are not abstract. They will materialize through specific, measurable events. For investors, the path forward is defined by a few critical watchpoints that will determine whether these risks become financial damage.

The most immediate threat to SpaceX is political. The June feud between President Trump and Elon Musk, which included threats to cancel government contracts, created a clear precedent for action. While both sides walked back their most extreme statements, the exchange highlighted a vulnerability. Any formal action by the White House or federal agencies to terminate or renegotiate SpaceX's extensive work with NASA and the Defense Department would have immediate and severe financial consequences. The company's projected $15.5 billion in 2025 revenue includes a significant, undisclosed portion from defense work. Losing even a fraction of this government revenue stream would directly pressure its cash flow and growth trajectory, undermining the financial foundation for its ambitious Starship and Starlink projects.

For Tesla, the risk is a confirmed sales decline. The company's own public release of a Q4 2025 delivery consensus of ~420,399 vehicles is a defensive move that underscores a fundamental problem. Delivering at or near this level would confirm that 2025 is the second consecutive year of declining volumes for the automaker. This trend, accelerating from a slight dip in 2024 to a projected ~8% drop in 2025, would be a massive reality check for a company priced for sustained growth. The primary risk is a protracted political standoff that delays or derails SpaceX's planned 2026 IPO, which is critical for funding its Starship and Starlink ambitions. The company is reportedly pursuing a public listing to raise more than $25 billion at a valuation over $1 trillion. A delay in this timeline would force SpaceX to fund its massive capital needs internally or through less favorable private markets, potentially slowing its development of space-based data centers and other long-term projects. The bottom line is that the path for both companies now runs through a narrow set of high-stakes events. For SpaceX, it is the stability of its government contracts; for Tesla, it is the resilience of its core auto business; and for both, it is the successful execution of their next major financial milestones.