Tesla investors can't quite believe what Musk has done now, stock drops

Tesla investors have had anything but a smooth ride in 2025, having started the new year with their stock at almost $424, reaching $432 after Trump’s inauguration, before a bumpy road to a $225 low in March.

Although Tesla stock has been impacted by various factors, including tariffs that have caused supply chain concerns, investors have perhaps been most rattled by the distracted focus of founder and CEO Elon Musk, whose government efficiency work with DOGE prompting accusations of taking his foot off the gas – with some investors demanding a gear change.

A survey of investors in March by Morgan Stanley found that eight in ten respondents said Musk’s political involvement was harming his businesses.

But then, the news that investors had been hoping for; Musk announced he would be stepping away from government to focus on his businesses. Tesla stock recovered to as high as $356, although the ride remains uncomfortable. Musk also began raising capital for his artificial intelligence business xAI Corp., said to have a $5 billion target.

As we start a new week, Tesla is trading at $293 in pre-market, down 7%, and politics is once again the issue.

There were already questions being asked following tough talk from Musk’s former ally President Trump who said the car maker’s government subsidies could be investigated by DOGE and may force Musk to “close up shop and head back home to South Africa.” 

But what’s unnerved investors now is Musk’s announcement that he is setting up his own political party – the America Party – renewing fears that political ambition would be a distraction to the billionaire’s day job.

The further leap into politics came as Trump’s One Big Beautiful Bill Act was narrowly passed by the House of Representatives and signed into law on July 4. Musk has been a staunch critic of the president’s signature legislation, calling it a budget-busting “abomination” and a “pork-filled” spending bill.

“Very simply Musk diving deeper into politics and now trying to take on the Beltway establishment is exactly the opposite direction that Tesla investors/shareholders want him to take during this crucial period for the Tesla story,” Wedbush Securities analyst Dan Ives said in a client note.

The announcement Saturday that Musk is going further into politics has also led to the postponement of a new ETF by Azoria Partners. The Azoria Tesla Convexity fund was due to launch this week, but the investment firm’s CEO James Fishback posted on X that this would be delayed.

“I encourage the Board to meet immediately and ask Elon to clarify his political ambitions and evaluate whether they are compatible with his full-time obligations to Tesla as CEO,” Fishback urged.

If that social media post was direct, the response of the president to Musk’s decision to launch a new party was more so: “I am saddened to watch Elon Musk go completely ‘off the rails,’ essentially becoming a TRAIN WRECK over the past five weeks,” Trump wrote on Truth Social.