💔 Bad bromance

Since breaking in favor of Trump hard during the 2024 election and making some of his vast resources available to the resurgent candidate, industrialist Elon Musk has formed a political alliance with US President Donald Trump that has changed the face of American politics. 

Up until departing from the White House last week, Musk spent the first several months of the administration as the de facto head of a new group within the executive branch called the Department of Government Efficiency. 

Yesterday, that alliance collapsed in a dramatic public fashion. 

• One point of contention between Musk and the White House was the forthcoming budget, which Musk has said would add to the government’s debt and undercut the mission he was given to help reduce government spending. The bill also axes the federal EV tax credit for customers, which jeopardizes Tesla revenue from selling regulatory credits.

• Thursday morning, Trump made a fairly direct attack on Musk, responding from the Oval Office by saying he’s “very disappointed in Elon. I’ve helped Elon a lot.”

• And thus, the opening blow was struck. “Without me, Trump would have lost the election, Dems would control the House and the Republicans would be 51-49 in the Senate,” Musk wrote in a post on X. “Such ingratitude,” he followed.

That’s when things got interesting. What happened next shook the entire market.

At this point, Tesla stock started dropping, as did Trump Media & Technology Group, the $TRUMP meme coin, and a whole fleet of Trump-adjacent stocks. That might not be a huge deal if this ended at “such ingratitude.” It didn’t, though:

• Musk, 54, later ominously pointed out that Trump, 78, has 3.5 years left as president “but I will be around for 40+ years…”

• Then Trump hit Musk where it hurts. On Truth Social, Trump said the easiest way to save money in the bill would be to cut the many government contracts and subsidies that Musk’s businesses benefit from. In addition to the EV tax credits that have made Teslas more affordable for some, SpaceX counts the US government as one of its largest customers.

• Musk started burning bridges. He then alleged that Trump’s name is in the Epstein files. He posted that “the Trump tariffs will cause a recession in the second half of this year.”

You can recap the whole round, bell to bell, here. 

By the end of the day, the damage was done. Tesla finished the day down 14%. Other Trump trades dropped, like Palantir and $DJT, which each finished down about 8%. Trump’s meme coin took a tumble. When titans clash, people get crushed underfoot. 

The Takeaway

It took months to build up the relationship between Donald Trump and Elon Musk, and a few hours on the internet to break it apart. But without that relationship, what’s left are policies that mostly hurt Tesla, like tariffs and cutting the EV tax credit. In fact, analysts at JPMorgan estimated the budget bill alone would cut Tesla’s profits in half. Whether or not this has long-term ramifications on the viability of their individual companies or the overall health of the market remains to be seen, but it was a rowdy afternoon. 

Read more.

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Our interactive chart shows just how not normal this is.

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