Political Crossfire: How Musk's Feud with Trump Threatens Tesla and SpaceX's Federal Contracts

The bitter public feud between Elon Musk and Donald Trump, escalating into a full-blown social media war in June 2025, has exposed a critical vulnerability for Musk's companies: their reliance on federal contracts. As the two once-allied figures clash over policy, ego, and personal accusations, investors must confront a stark reality—political risk has become a material threat to Tesla (TSLA) and SpaceX. This article examines how their falling-out could destabilize key revenue streams and what it means for investors.

The Political Risk Equation

Musk's companies thrive on federal funding. Tesla's profits rely heavily on regulatory credits sold to automakers, while SpaceX's growth is fueled by NASA and Department of Defense (DoD) contracts. The provided data reveals:
- SpaceX: Federal contracts (NASA, DoD) accounted for 25% of its 2024 revenue, with Starlink's military and government deals adding billions.
- Tesla: Regulatory credits contributed ~30% of profits since 2014, including $1.6B in 2020 that kept the company solvent.

The Trump-Musk rift now jeopardizes these relationships. After Musk criticized Trump's “One Big Beautiful Bill” as a “disgusting abomination” and proposed a centrist “America Party,” Trump retaliated, threatening to cut federal contracts with Musk's firms. The risk isn't hypothetical:

Tesla's stock has fallen over 40% year-to-date in 2025, exacerbated by Musk's public feud with Trump.

Key Vulnerabilities

1. SpaceX's Federal Lifeline

SpaceX's $15.5B revenue projection for 2025 hinges on government partnerships:
- NASA: The $620M paid in 2024 for the Artemis lunar lander is part of a $14.9B commitment.
- DoD: Starlink's Pentagon contracts (e.g., $537M for Ukraine's military) and classified spy satellite deals total $7.6B.

If Trump's administration pivots to punish Musk, SpaceX could lose access to these projects. For instance:
- The $6B Starlink military contract with the Space Development Agency might be delayed or canceled.
- NASA's next lunar lander or Starshield (a classified national security program) could go to rivals like Blue Origin or Lockheed Martin.

2. Tesla's Regulatory Dependency

Tesla's profit margin is thin without subsidies. The $11.4B in regulatory credits since 2014 have been a lifeline. If political tensions lead to reduced support:
- Tax incentives: Musk has lobbied to end EV tax credits for competitors, but bipartisan backlash could backfire.
- State contracts: Tesla's $4.5M in government vehicle purchases (per USASpending.gov) could dry up if states align with anti-Musk rhetoric.

Investment Implications

Risks to Consider

• Stock Volatility: Tesla's share price has already tanked due to Musk's overextension and political missteps. Further clashes could trigger deeper declines.
• Project Delays: SpaceX's Starlink and NASA missions face uncertainty if funding is redirected.
• Reputational Damage: Musk's feud has alienated both Republicans (who distrust his centrist pivot) and Democrats (angered by his anti-regulatory stance).

Opportunities in the Crossfire

• Competitors: Boeing (BA) or Lockheed Martin (LMT) could win contracts diverted from SpaceX.
• Non-political sectors: Consumer tech or healthcare stocks (e.g., Johnson & Johnson, JNJ) offer insulation from political drama.
• Shorting Tesla: For aggressive investors, betting against Tesla's stock could profit from continued volatility.

Mitigation Strategies

• Diversify: Pair Tesla/SpaceX holdings with companies less tied to federal contracts.
• Monitor Contracts: Track NASA and DoD spending announcements—any delays or reassignments to rivals signal trouble.

Conclusion

Musk's feud with Trump isn't just a PR crisis; it's a financial time bomb for Tesla and SpaceX. Their dependence on government contracts leaves them exposed to political whims, and investors should brace for turbulence. While SpaceX's innovation remains unmatched, its reliance on federal funding creates a ceiling for growth. For now, caution is warranted—investors might want to hedge with stable sectors or lean into competitors poised to capitalize on Musk's missteps.

In the end, the lesson is clear: in an era of hyper-partisanship, companies tied to volatile political figures face risks as real as any market downturn.

SpaceX's government revenue (NASA/DoD) has grown steadily, but political risks could disrupt this trajectory.