$TSLA's Political Storm: Investors Flee as Musk's Government Role Takes a Toll

The political climate surrounding $TSLA has taken a significant toll on its stock price, with shares plummeting over 40% this year. The once-high-flying stock is now on track for its longest streak of losses on record, erasing about $536 billion in market value. The decline is partly due to a broad retreat from the "Magnificent Seven" tech stocks, but $TSLA faces unique challenges.

Elon Musk's role in the Trump administration has repelled some of the fans who helped popularize Tesla cars and make the stock one of Wall Street's hottest trades. For some, mass firings of federal workers are the issue, while others are concerned with Musk's social-media posts or think he is too distracted with government business to run Tesla effectively.

Investors like Michael Hanna, a data architect in Washington state, have sold their $TSLA shares due to Musk's behavior as part of the Trump administration. Hanna considered himself politically independent but was bewildered by Musk's "chaotic" leadership of the Department of Government Efficiency. Controversy surrounding Musk is bad for Tesla sales, he said.

The topic has entered the political arena, with Trump administration officials talking up Tesla. Trump earlier this month selected a red Tesla sedan at the White House in a show of support. Commerce Secretary Howard Lutnick used a TV appearance this week to recommend the public buy shares, saying: "It’s unbelievable that this guy’s stock is this cheap. It’ll never be this cheap again."

Individual investors have long flocked to the shares, betting that Musk’s leadership could make Tesla worth far more than an ordinary car company. However, investors' devotion is being tested. Some sellers say they are driven by disapproval of Musk’s government cuts, or moral opposition to his more controversial social-media posts.

Edward Sanchez, based in San Jose, Calif., was both a Tesla car owner and shareholder until just a week ago, when he sold the stock. Now, he’s considering getting rid of the car, too. Sanchez purchased the vehicle in 2016 and then about 150 shares in the company five or six years ago, having bought into Musk’s techno-utopian vision for electric vehicles. That resonated with Sanchez, a tech worker who likes to support environmentalist causes.

As Musk became more involved in conservative politics, Sanchez’s skepticism grew. He was appalled when the CEO made a gesture at an inauguration event in January that some interpreted to be a Nazi salute. The recent display of various Tesla models in front of the White House was another cringeworthy moment, he said.

Sanchez finally liquidated all his shares in March, he said, though his financial adviser suggested he hold on and wait for the stock price to recover some of its losses. "I told him, ‘I don’t care, I want out.’"

For others, the concern is more practical. Tony Herbert first spotted a Tesla at a birthday party in 2012 in Dallas and immediately wanted one for himself. In 2018, he invested around $5,000 in the company—the first stock he ever bought—with the goal of using profits from the rising share price to purchase a Model 3.

In the years that followed, his investment ballooned. But in February, he sold it all. He felt that billionaires were being villainized by the public, and he was starting to lose faith that the stock could stay on track. Herbert said he would consider jumping back in at a lower price. First, he would like to see one change in the company: a new executive.

“Elon’s too focused on other things,” he said.

Despite the challenges, plenty of individual investors are still piling in. Of the $8.3 billion that individual investors poured into single stocks last week, roughly $3.2 billion flowed into Tesla, according to a Wednesday report from JPMorgan analysts. However, the political storm surrounding $TSLA shows no signs of abating, and investors should be prepared for continued volatility.