Tesla and SpaceX: Navigating Fiscal Crossroads Amid Musk's Political Divide

The once-unshakable alliance between Elon Musk and Donald Trump has fractured into a public feud, with profound implications for Tesla (TSLA) and SpaceX's valuation. Musk's ideological shift—from fiscal conservative ally to critic of Trump's “Big Beautiful Bill”—has exposed vulnerabilities tied to government subsidies and contracts. Yet, beneath the political turmoil lies a strategic pivot that could redefine these companies' financial trajectories. Here's how investors should assess the risks and opportunities.

The Political Fallout: From Alliance to Adversary

The rift began in May 2025 when Musk lambasted Trump's $2.4 trillion deficit-boosting bill as a “disgusting abomination.” This clash, rooted in Musk's role as co-lead of the Department of Government Efficiency (DOGE), highlighted a core conflict: Musk prioritizes fiscal austerity, while Trump's agenda favors tax cuts and spending hikes.

The fallout escalated into a war of words, with Trump threatening to cut subsidies to Musk's companies and Musk accusing Trump of ingratitude. The stakes? Over $15 billion in government contracts and subsidies for Tesla and SpaceX, including EV tax credits and NASA/Defense Department funding.

Financial Risks: Dependency on Government Dollars

Tesla's Subsidy Lifeline

Tesla's profitability relies heavily on government support. Since 2014, $11.4 billion in regulatory credits (from selling carbon credits to competitors) have been critical to its bottom line. In 2020, these credits alone turned a projected $718 million loss into an $862 million profit.

The “Big Beautiful Bill” aimed to eliminate clean energy subsidies, potentially stripping Tesla of $3.2 billion annually—equivalent to 58% of its 2024 net income. Even without legislative changes, political instability has spooked investors:

The 14% single-day drop in May 2025 (erasing $152 billion in market cap) underscores vulnerability to policy shifts.

SpaceX's Contract Exposure

SpaceX's $3.4 billion in 2024 federal contracts (25% of its revenue) include NASA's $2.8 billion Lunar Gateway program and Pentagon spy satellite deals. While classified contracts shield some details, $11.8 billion in pending government deals remain at risk if Musk's clashes with Trump's administration escalate.

Opportunities: Diversification and Innovation

Tesla's Path to Self-Sufficiency

The feud may force Tesla to reduce reliance on subsidies. Musk's push for autonomous “Robotaxi” services—projected to generate $20 billion annually by 2030—could offset lost government support. However, regulatory hurdles remain: delays in Robotaxi approvals (cited by analysts) threaten this timeline.

SpaceX's Commercial Pivot

SpaceX's Starlink division—already generating $9.3 billion in annual revenue—is less dependent on government funds. Musk's focus on private satellite launches and lunar tourism could insulate SpaceX from political whims.

Investment Thesis: A High-Risk, High-Reward Duality

Tesla: Proceed with Caution

• Near-Term Risks:
• Subsidy cuts could reduce net income by 50–70%.
• Stock volatility (beta of 2.43) suggests further swings.
• Long-Term Upside:
• Autonomous tech and global EV dominance remain unmatched.
• Analysts project a $500 price target if Robotaxi succeeds.

Tesla's 185x multiple vs. an industry average of 30x reflects high expectations—and risks.

Action: Use dollar-cost averaging, targeting dips below $250. Avoid chasing rallies without clarity on subsidies.

SpaceX: A Safer Bet in the Portfolio

SpaceX's private-sector growth (Starlink, satellite launches) offers insulation from political drama. Its $22 billion in cumulative government contracts (vs. Tesla's $2.1 billion) remain stable unless the U.S. abruptly cancels defense programs—a low-probability event.

Conclusion: Ride the Wave of Innovation, Not Politics

The Musk-Trump feud is a symptom of broader tensions between tech capital and populist fiscal policies. For investors, the key is to separate temporary volatility from long-term fundamentals:
- Tesla: A “buy” only if you can stomach 40% downside risk. Focus on execution of Robotaxi and margin improvements.
- SpaceX: A core holding for exposure to commercial space and telecom growth.

As Musk shifts focus from political theater to product execution, the market may finally price in reality over rhetoric.

Final Note: Monitor government contract renewals and Robotaxi regulatory approvals closely. These metrics will determine whether Musk's companies thrive—or merely survive—the fallout.