Tesla Shares Plunge as Musk Launches 'America Party'

Investors fear political distractions and Trump backlash could derail Tesla’s recovery and long-term growth

Tesla Stock Falls as Musk Wades Deeper into Politics

Tesla shares dropped over 7%, wiping out nearly $71 billion (£52 billion) in market value after CEO Elon Musk announced the formation of a new political entity, the "America Party". Investors were quick to react to concerns that Musk is once again diverting focus away from Tesla’s business, sparking a sharp sell-off on Wall Street.

Political Fallout with Trump Worsens

The latest market shock follows escalating tensions between Musk and President Donald Trump. The two, once allies, have become public adversaries after Musk criticised Trump’s new $5 trillion tax-and-spend package, calling it “insane” and labelling the US a “Porky Pig Party” in a post on X (formerly Twitter).

Musk then created a poll asking followers if he should launch a new party. With 65.4% voting ‘yes’, the America Party was announced the next day.

Trump Responds with Harsh Criticism

Trump, via Truth Social, slammed Musk as a “train wreck” and mocked the idea of a third-party bid in the US, which he said has "never succeeded." He also hinted that Musk and Tesla could lose further government contracts and subsidies, raising investor alarm about future revenue risks.

Tesla Already Under Pressure

Tesla's stock has been under pressure since Trump’s re-election, falling 35% from its December peak. Factors contributing to the slide include:

• Threats to government subsidies via Trump’s DOGE department
• Concerns about Musk's political entanglements
• Ongoing global trade tensions affecting EV demand
• Weakening quarterly sales throughout H1 2025

Musk had briefly returned focus to Tesla, but the formation of the America Party rekindles worries of political distraction.

Investor Reaction: Distraction and Risk Dominate Sentiment

Market strategist Neil Wilson of Saxo Markets commented:

“Investors are worried about two things: further backlash from Trump affecting subsidies, and more importantly, Musk getting sucked back into politics.”

Many investors had hoped Musk’s return to full-time business leadership would revive Tesla’s fortunes. Instead, the re-emergence of his political activity has reignited fears of brand damage, operational distractions, and policy risk.

What This Means for Investors

Short-Term Uncertainty

Investors should prepare for increased volatility, with Tesla likely to remain reactive to political developments.

Political Risk Premium

The company may face a higher political risk discount, especially if federal funding or contracts are scaled back.

Long-Term Potential Still Intact

For long-term investors, the core innovation and global EV leadership still provide upside—but only if Musk refocuses on Tesla’s roadmap.

Final Takeaway

Tesla’s recent share slump highlights how Elon Musk’s political involvement is creating new investment risks. While his ambitions to disrupt the US political system may resonate with some, for investors, the priority remains stable leadership and consistent execution.

Unless Musk reasserts his full attention on Tesla, further volatility may lie ahead.

Source: (SKY.com)