Elon Musk's empire is currently navigating a challenging landscape, marked by his escalating conflict with former President Trump. While it’s not accurate to say that Musk's empire is crumbling, it certainly appears increasingly vulnerable as tensions rise. This situation is significant because Musk, the world's richest person, saw his wealth soar during his initial alliance with Trump. However, their relationship has soured considerably, particularly after Musk criticized Republican spending initiatives.
In the latest news, Tesla shares experienced a sharp decline on Monday, dropping 6.8%. This decline follows Musk's announcement of a new political party, dubbed the America Party, along with his intentions to focus on key House and Senate seats in the upcoming 2026 elections. Since severing ties with Trump last month, Musk has seen his net worth decrease by nearly $20 billion on paper, while his investors have collectively lost more than $100 billion.
The numbers tell a troubling story: Tesla shares are down approximately 14% since early June, when Musk first publicly criticized the administration's spending bill, which led to a full-blown rift. The broader implications of this rift are significant, as anyone who opposes Trump risks alienating his vast base of supporters, including Republican lawmakers who currently dominate all three branches of government in Washington.
Investors who had been anticipating favorable regulatory conditions for Tesla and ongoing government contracts for SpaceX are now left questioning their positions. Ivana Delevska, founder of Spear Invest, recently decided to sell off her Tesla shares due to the increasing risks tied to Musk's political involvements. She expressed that while the potential for reward remains high, the associated risks are equally daunting.
The timing of these developments is particularly critical for Musk’s ventures. In June, Tesla began deploying robotaxis in Austin, a key component of its future growth strategy. Meanwhile, the company faces stiff competition from global players like Chinese EV manufacturer BYD, which is rapidly expanding its market share in both China and Europe. Furthermore, Tesla's sales have taken a hit, with second-quarter deliveries plummeting nearly 14%, potentially linked to backlash over Musk's political activities.
According to William Blair analyst Jed Dorsheimer, investor patience is wearing thin amidst these distractions, especially at a time when Musk’s focus is critically needed. He remarked that the outlook appears grim as Musk’s foray back into politics could detract from essential business operations.
Despite these challenges, Musk remains significantly wealthy, with an estimated net worth of around $361 billion, according to the Bloomberg Billionaires Index. This places him over $100 billion ahead of the world's second-richest individual, Mark Zuckerberg, as of Monday.
As the situation unfolds, a pressing question arises: Will Tesla's board members urge Musk to tone down his political engagement? Historically, the Tesla board has been unwavering in its support of Musk. However, reports from the Wall Street Journal in the spring suggested that the board may have initiated a search for a potential replacement CEO. Although both Musk and Tesla chair Robyn Denholm denied these claims, the dynamics of Musk's control over his various private companies, such as SpaceX and xAI, are also noteworthy.
Investors were initially encouraged when Musk announced he would step back from politics to concentrate on his businesses. However, this commitment appears to have been short-lived. Dorsheimer emphasized the need for Musk to redirect his efforts towards the critical robotaxi rollout at this pivotal moment. The future of Musk's companies hangs in a precarious balance, and how he navigates these political waters will undoubtedly influence his ventures.
