Trump vs. Musk: A New Frontier for Defense Gains and EV Volatility

The bitter feud between President Donald Trump and Elon Musk has escalated into a high-stakes battle with profound implications for U.S. government subsidies, defense contracting, and the electric vehicle (EV) market. As the two figures clash over everything from SpaceX's NASA contracts to Tesla's tax credits, investors now face a clear opportunity: pivot toward defense and tech stocks poised to gain from reduced SpaceX influence, while shorting EV equities exposed to subsidy cuts. Here's how to navigate this political storm.

Defense Contractors: The Winners in a Post-SpaceX World

SpaceX's dominance in government contracts—worth billions—has long relied on bipartisan support. But Trump's threats to slash funding could upend that dynamic. In 2024 alone, NASA awarded SpaceX $3.8 billion for lunar landers and crew missions, while the Pentagon gave it $7.6 billion for projects like spy satellites. Should Trump succeed in reducing these subsidies, traditional aerospace giants like Lockheed Martin (LMT) and Boeing (BA) stand to regain market share.

Lockheed, for instance, has quietly maintained its grip on high-security Pentagon contracts, such as the $14 billion Jaguar missile program. Meanwhile, Boeing's Starliner spacecraft, despite delays, remains NASA's only alternative to SpaceX's Dragon for crewed missions to the International Space Station.

Blue Origin (subsidiary of Amazon, AMZN), too, could benefit. Jeff Bezos' firm has lobbied relentlessly for a slice of NASA's lunar exploration budget, recently securing a $2.6 billion contract for its Blue Moon lander. Unlike SpaceX, Blue Origin's business model leans less on federal handouts and more on private investment and international partnerships—a strategy that insulates it from political whims.

The EV Market: Betting Against Subsidy Dependency

Tesla (TSLA) has built its empire on government largesse. Regulatory credits from selling zero-emission credits to competitors generated $2.8 billion in 2024, while the federal EV tax credit and renewable energy incentives are critical to its bottom line. JPMorgan estimates ending these subsidies could cost Tesla $3.2 billion annually.

The "One Big Beautiful Bill Act," which would eliminate EV tax credits, has already sent Tesla's stock reeling. Musk's public feud with Trump—sparked by his dismissal of the bill as a "disgusting abomination"—has exacerbated investor anxiety, driving Tesla's shares down 14% in 2025 alone.

For investors, this volatility presents a shorting opportunity. Tesla's valuation relies on assumptions of endless subsidies and regulatory favoritism—a shaky premise in a politically divided era. Meanwhile, EV rivals with less subsidy dependence, like Ford (F) and General Motors (GM), are better positioned. Ford's F-150 Lightning leverages its truck dominance, while GM's Ultium battery platform aims to cut costs independent of federal aid.

The Strategic Playbook

1. Buy Defense Stocks: Accumulate positions in LMT, BA, and AMZN (via Blue Origin). These companies offer exposure to a post-SpaceX defense landscape.
2. Short Tesla: Use options or inverse ETFs to capitalize on subsidy-related declines.
3. Go Long on Subsidy-Lite EVs: Consider Rivian (RIVN) and Lucid (LCID), which target premium markets, or BYD (BYDDY), a Chinese firm with minimal U.S. subsidy exposure.

Risks and Considerations

• Political Uncertainty: Trump's threats could fade if the "One Big Beautiful Bill" fails, temporarily boosting Tesla.
• SpaceX's Resilience: Musk's technological edge (e.g., Starship) might sustain its contracts despite political headwinds.

Conclusion

The Trump-Musk rift is more than a celebrity feud—it's a seismic shift in how Washington funds innovation. Investors who pivot to defense stocks and short EV equities tied to subsidies stand to profit as this political drama unfolds. In a world where government contracts and tax breaks are weaponized, the safest bets are those least reliant on them.

Investment advice: Past performance does not guarantee future results. Consult a financial advisor before making decisions based on this analysis.