Tesla (NASDAQ:) shares tumbled 6.77% in premarket trading on Monday morning, falling to $294.00 after CEO Elon Musk announced the formation of a new political party called the “America Party” over the weekend.
The dramatic stock decline reflects investor concerns about Musk’s deepening involvement in politics and its potential impact on Tesla’s business operations.
Trading at $315.35 at Friday’s close, the premarket drop wiped approximately $21.35 off the stock price, signaling significant market unease with Musk’s latest political venture. The announcement has also sparked a public feud with President Donald Trump, who dismissed the new party as “ridiculous” and launched personal attacks against the Tesla CEO.
Musk’s America Party Launch Sparks Political Firestorm and Puts Tesla at Risk
Elon Musk announced Saturday the formation of the “America Party,” positioning it as a response to Trump’s recently signed tax-cut and spending legislation that Musk criticized as fiscally reckless.
The Tesla CEO claimed the new party would focus on “just 2 or 3 Senate seats and 8 to 10 House districts” to serve as the deciding vote on contentious laws, ensuring they serve “the true will of the people.” Musk’s criticism centered on what he called Trump’s “big, beautiful bill,” which he argued could add $5 trillion to the national deficit, questioning the purpose of the Department of Government Efficiency (DOGE) that he briefly led.
The announcement represents a dramatic shift from Musk’s previous alliance with Trump, where he served as a major supporter during the 2024 campaign, contributing over $280 million predominantly to Trump and other Republican candidates.
Their relationship soured after the spending bill stripped key green-energy credits that benefited Tesla, leading to Musk’s departure from DOGE in May. The billionaire has pledged to target Republican incumbents in upcoming midterm elections who supported the legislation, setting up potential primary challenges within the party.
President Trump responded swiftly and harshly to Musk’s political move, calling the third-party idea “ridiculous” and stating that “third parties have never worked.”
Trump escalated his criticism on Truth Social, describing Musk as having gone “completely ‘off the rails’” and becoming a “TRAIN WRECK over the past five weeks.”
The president also threatened to revoke government subsidies and contracts awarded to Tesla and SpaceX, while defending his earlier decision to withdraw Jared Isaacman’s NASA nomination due to concerns about conflicts of interest with Musk’s space ventures.
Tesla Stock Suffers as Investors Grow Weary of Political Distractions
Tesla shares opened premarket trading at $294.00, down $21.35 or 6.77% from Friday’s closing price of $315.35, reflecting immediate investor concern about Musk’s renewed political involvement.
The stock has shown volatility throughout 2025, with a year-to-date return of -21.91% compared to the ’s positive 6.76% return. Despite the recent decline, Tesla maintains a substantial market capitalization of approximately $1.016 trillion, though the political uncertainty adds pressure to an already challenging year for the electric vehicle manufacturer.
Market analysts have expressed particular concern about the timing and implications of Musk’s political pivot. Dan Ives of Wedbush Securities noted that “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.”
The analyst pointed to a “broader sense of exhaustion from many Tesla investors that Musk keeps heading down the political track,” suggesting that while core supporters may remain loyal, the broader investment community is growing concerned about management focus and potential business disruptions.
The political controversy comes at a critical time for Tesla, which is navigating competitive pressures in the electric vehicle market and working to maintain its technological leadership position. With earnings per share at $1.73 and a trailing P/E ratio of 180.20, the company trades at premium valuations that require consistent execution and management focus.
Investors appear increasingly worried that Musk’s political activities could distract from Tesla’s core business operations, particularly given the potential for government contract retaliation and the broader uncertainty surrounding the America Party’s impact on Tesla’s regulatory environment and public perception.
***
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
This article was originally published on The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.