Elon Musk clashing with Donald Trump sent the Tesla (NASDAQ:TSLA) share price down 15% Thursday (5 June). But I think this might be an overreaction.
There’s always noise with Musk’s AI-and-robotics-company-that-just-happens-to-make-cars. And my instinct is more of the same.
What’s going on?
The latest news is that the CEO has had a spectacular falling out with Trump. The former criticised the latter’s ‘Big Beautiful Bill’ saying it would increase the US National Debt.
Trump responded by saying that Musk only objected because the bill threatened to eliminate electric vehicle (EV) tax credits. And these have been a valuable asset to Tesla in recent years.
The President also threatened to end government contracts and subsidiaries with the Tesla CEO’s other companies. Musk then made some accusations about Trump’s connection to the Epstein files.
Of course, all of this played out on social media at speed and the Tesla share price fell sharply as a result. But I suspect this might be an overreaction.
Why this might be a problem
There’s a clear case for thinking this might be a problem. Musk making an enemy of the US President could well be an issue for Tesla shareholders.
Aside from EV credits, the launch of the firm’s robotaxi network is supposed to be imminent. And in my view, the biggest and most obvious obstacle to overcome here is regulation.
Unlike a lot of people, I thought Musk’s involvement in the US government was a good thing. As I saw it, this gave Tesla the best chance of getting the regulatory approval it needs for its vehicles.
Antagonising Trump might well have the opposite effect. And as Musk has repeatedly said Tesla stock’s hugely overvalued if the company can’t solve autonomy, this could be a real concern.
The latest TACO trade?
On the other hand, the latest investing acronym going around is TACO, or ‘Trump Always Chickens Out’. It refers to proposed trade tariffs from the US that – for whatever reason – haven’t materialised (yet).
Whether it’s Trump backing down or other countries rushing to renegotiate trade deals isn’t really the point. What matters is that the things the President has threatened/promised don’t always come to pass.
I think investors might consider this carefully in the context of the Tesla share price. I’m not saying Trump won’t end EV tax credits, but I don’t think it’s guaranteed just yet.
If the threats ultimately come to nothing, the stock just fell 15% for no reason. And – almost by definition – that makes it much more attractive than it was a day ago.
Here’s what I’m doing
Disappointingly, there are two main reasons I’m not doing anything about the falling Tesla share price. One is a boring one and the other is more interesting.
The boring reason is that I can’t buy the stock for two (full) working days after having written about it. And I strongly suspect the situation will have changed again by the time Wednesday comes around.
The other reason is that this isn’t my style as an investor. While my instinct is that this will turn out to be noise, that’s a bit of a guess and I have other ideas I’m much more confident about right now.
