Tesla stock plunges: Investors bear the brunt of escalating Trump-Musk online feud

Dubai: Tesla shares took a sharp hit in early trading on Monday, plunging over 8%, following CEO Elon Musk’s announcement of a new political venture dubbed the “America Party.”

The development marks another chapter in Musk’s high-profile—and increasingly strained—political saga, which now appears to be unsettling investors once again.

In a weekend post, Musk revealed plans to form a political party aimed at influencing a handful of U.S. Congressional seats, stating that winning “just 2 or 3 Senate seats and 8 to 10 House districts” could provide the leverage needed to shape legislation.

While he positioned the initiative as a response to what he described as a disconnect between government decisions and the “true will of the people,” his statement sparked debate in political circles.

This had a more immediate and measurable impact on Tesla Inc.’s market value, as investors reacted with concern to the billionaire’s growing political entanglements.

“This is exactly the opposite direction that Tesla investors want Musk to take right now,” said Dan Ives, global head of technology research at Wedbush Securities, in a client note on Sunday.“There is a broader sense of exhaustion from many Tesla investors that Musk keeps heading down the political track.”

Musk’s political activity has been under scrutiny before. Earlier this year, he briefly joined a U.S. government panel—the Department of Government Efficiency (DOGE)—working closely with President Donald Trump. That move sparked brand-related concerns among Tesla shareholders.

His departure from DOGE in May was viewed positively by the market and contributed to a temporary recovery in Tesla’s share price. But his renewed political activism—now positioning himself as a potential disruptor to Washington's political establishment—has reignited those same investor concerns.

Musk’s relationship with Trump has also soured. Once praised by the former president, Musk has recently criticized Trump’s fiscal policies, including cuts to renewable energy incentives and tax credits for electric vehicles.Trump, in turn, labeled Musk’s new political party “ridiculous” on Sunday and accused the Tesla CEO of having gone “completely off the rails.”

The timing of Musk’s political announcement coincides with growing operational challenges at Tesla. The automaker recently reported a 14% year-over-year decline in vehicle deliveries for Q2, missing analyst expectations. While Tesla delivered 384,122 vehicles, some investors were braced for an even steeper drop, which had briefly buoyed the stock last week.

Tesla shares rose 5% last Wednesday after the delivery numbers came in above worst-case projections. However, the stock remains down around 22% year-to-date, with mounting competition in key markets like China adding further uncertainty to the company’s trajectory.

“We’re at the bottom here,” said Gene Munster, managing partner at Deepwater Asset Management, speaking to Bloomberg. “But Musk needs to focus—this isn’t the time for distractions.”

For long-time Musk supporters, the CEO’s outsized persona and boundary-pushing ventures have been part of the appeal. But for a growing number of institutional investors, his foray into political disruption comes at a sensitive time for Tesla’s fundamentals.

The fear is not just reputational—it’s strategic. As Tesla navigates tightening margins, global EV competition, and rising pressure to innovate beyond vehicles, shareholder confidence hinges on Musk’s ability to stay focused on Tesla’s core mission.

Bottom line? As Elon Musk steps further into political territory, investors are watching closely—and reacting swiftly. Whether the "America Party" vision gains traction or not, its impact on Tesla’s market value and investor sentiment is already being felt.