Habib Ur Rehman
2 min read
In This Article:
On Thursday, June 5, Tesla (NASDAQ:TSLA) stock took a nosedive, dropping 14% and erasing over $150 billion in market value. The sharp decline was triggered by a public spat between TSLA CEO Elon Musk and President Trump.
Musk publicly criticized the President's proposed tax and spending legislation, cheekily called the "One Big Beautiful Bill Act."
Among other things, the bill has implications for EV subsidies, which are vital to Tesla's business model. The bill would scale back numerous tax credits for the purchase and production of EVs, which also includes the $7,500 consumer credit. The bill would also eliminate tailpipe-emission rules that incentivize car manufacturers to electrify their up and upcoming models over the next decade.
Musk, in addition to concerns over EV tax credits and personal attacks on the POTUS, also expressed concerns over the bill's "potential to increase the national deficit by $2.5 trillion over the next 10 years." The white house, on the other hand, has disputed the claim.
POTUS, in response, threatened to cut off federal contracts with Musk's companies, including Tesla and SpaceX.
"The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon's Governmental Subsidies and Contracts. I was always surprised that Biden didn't do it!"
However, by the next day, the stock rebounded over 5%, and recovered some of the lost ground. The recovery was due to the reports suggesting a potential de-escalation between Musk and Trump, although the White House later denied any scheduled call.
Despite the rebound, analysts remain cautious and noted that the feud could have long-term implications for Musk's companies with the federal government, especially regarding regulatory approvals for innovations like driverless robotaxis.
While we acknowledge the potential of TSLA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.
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Disclosure: None.
