Adding to the pressure, Tesla is already under scrutiny for potentially losing EV tax credits due to policy changes, especially now that Musk has aligned himself with Donald Trump, who recently returned to office. That partnership, while politically powerful, may lead to friction with lawmakers pushing for stricter climate policies.

Analysts from Saxo Markets said investors are worried Musk is spreading himself too thin. Tesla already missed delivery targets for two straight quarters. Now, with Musk stepping deeper into U.S. politics, confidence in Tesla's future growth is taking a hit.

Many think it is. Tesla stock has now dropped 35% since reaching its peak after Donald Trump’s 2024 re-election. That rally was partly fueled by hopes of policy support for EVs. But with Trump now threatening to slash EV subsidies—and Musk openly clashing with him—Tesla could face real financial risks.

Market analysts like Dan Ives of Wedbush noted that Musk’s move into politics has left many shareholders feeling “exhausted.” Meanwhile, some firms are backing away. Investment firm Azoria Partners delayed launching a Tesla-focused ETF and called on Tesla’s board to consider Musk’s political distractions.

What are analysts saying about tesla’s future?

Analysts moved quickly after the news broke. William Blair’s Jed Dorsheimer downgraded Tesla stock, citing increased risk from regulatory changes and CEO distraction. Short sellers had a field day—according to data from Ortex, traders betting against Tesla made an estimated $1.4 billion in profits in just one day.

Even among longtime Tesla bulls, there’s unease. Some warn that while Tesla still leads in autonomous vehicle development and global EV sales, its stock might remain under pressure if the political controversy grows.

Despite the drop, Tesla’s fundamentals haven’t changed overnight. The company is still expected to report solid earnings on July 23, and its robotaxi platform and Optimus robot program are seen as potential future drivers of revenue. But with Musk now splitting his time between tech and politics, investor confidence has clearly taken a hit.

Can Tesla stock recover from this?

Tesla still has strong fundamentals and cutting-edge technology, but the road ahead may be bumpy. Investors are watching closely for the Q2 earnings report on July 23, which will show how Tesla is performing in real business terms.

Until then, uncertainty around subsidies, deliveries, and Musk’s political future will likely continue to pressure the stock. If deliveries miss expectations again or political tensions grow, the stock could face more turbulence.

A: Investors fear his political focus will distract from Tesla’s core business.

Q2: How much value has Tesla stock lost since December?
A: Tesla has dropped 35% from its $488 peak, losing billions in value.