Tesla's Market Volatility Amid the Trump-Musk Feud: Navigating Regulatory Risks and Stock Resilience

The bitter feud between Elon Musk and Donald Trump has thrust Tesla into a political and regulatory crossfire, testing the resilience of its stock and long-term growth narrative. As the two figures clash over policy, subsidies, and personal vendettas, investors are left to assess whether Tesla's valuation can withstand the fallout—or if this turmoil presents a buying opportunity.

The Immediate Fallout: Stock Volatility and Political Crosshairs

The feud's opening salvos sent Tesla's stock into freefall. On June 6, 2025, shares plummeted 14%—erasing $152 billion in market value—after Trump vowed to terminate Tesla's government subsidies and Musk retaliated by threatening to abandon SpaceX contracts. While the stock partially rebounded, it remained down nearly 10% by midweek, marking its worst single-day loss in history.

The selloff reflects investor anxiety over three critical risks:
1. Regulatory Sabotage: Trump's administration could block Tesla's autonomous driving initiatives, including its Austin robotaxi rollout, which relies on Texas's lax rules but faces federal scrutiny.
2. Subsidy Stripping: Tesla's $2.8 billion in annual carbon credit revenue hangs in the balance if Trump weakens emissions standards.
3. Consumer Backlash: Musk's break with Trump risks alienating conservative buyers, exacerbating a 71% profit drop in Q1 2025.

Regulatory Risks: A Double-Edged Sword

Tesla's autonomous driving ambitions are now a political pawn. The company's June 2025 robotaxi launch in Austin proceeded without pre-market approval due to Texas's deregulated environment, but federal regulators like NHTSA are demanding answers. A
- Autonomous Tech Hurdles: NHTSA's inquiry into Tesla's Full Self-Driving (FSD) system could delay safety approvals, undermining its robotaxi expansion.
- Carbon Credit Collapse: If Trump scraps emissions mandates, rivals like BYD may no longer need Tesla's credits, stripping $2 billion in annual revenue.

Yet, Tesla's valuation—140x projected earnings—already assumes a best-case scenario. Analysts warn that missed regulatory milestones or lost subsidies could reprice the stock aggressively.

The Reconciliation Gambit: Can Cooler Heads Prevail?

Wedbush's Dan Ives bets on a détente, citing Musk and Trump's history of mutual benefit. A reconciliation could stabilize subsidies, calm regulators, and halt the stock's bleeding. But the stakes are high:
- SpaceX's Federal Contracts: Trump's threats to cut SpaceX's $3.8 billion in NASA and DoD deals could cripple Musk's broader empire.
- Reputation Overhang: Musk's unproven claims about Trump's ties to Epstein could invite congressional investigations, diverting focus from Tesla's product pipeline.

Investment Strategy: Navigating the Crosscurrents

For investors, the feud presents a paradox: Tesla's valuation is sky-high, yet its stock is vulnerable to political whims. Here's how to position:

Short-Term: Exploit the Dip

The 14% plunge on June 6 created a rare entry point. Investors with a 6–12-month horizon might buy shares near $160–$170 (post-selloff levels), assuming the feud cools. However, this requires hedging against further regulatory shocks.

Long-Term: Focus on Fundamentals

Tesla's strengths—its $28 billion in cash, Model 3/Y dominance, and 25,000 Superchargers—remain intact. The stock's valuation hinges on two outcomes:
1. Autonomous Success: If the Austin robotaxi proves FSD's reliability, Tesla's software monetization could justify its premium.
2. Regulatory Truce: A détente with Trump would stabilize subsidies and approvals, easing investor fears.

Risk Management:

• Avoid Overexposure: Allocate no more than 5% of a portfolio to Tesla unless regulatory clarity emerges.
• Monitor NHTSA Updates: A favorable ruling on FSD could spark a rally; delays will amplify volatility.

Conclusion: A High-Reward, High-Risk Gamble

Tesla's stock is a referendum on Musk's ability to navigate political storms while executing on autonomous tech. The Trump-Musk feud has exposed vulnerabilities in Tesla's reliance on subsidies and regulatory good will. Yet, its underlying strengths—affordable EVs and global scale—suggest resilience if the company can weather the current turmoil.

For investors, the calculus is clear: Tesla's valuation demands perfection. Those willing to bet on Musk's comeback and regulatory survival may find rewards ahead—but patience and caution are critical.