Under the impact of political turmoil, is Tesla's "dream premium" collapsing? Analysts warn: the risk of catching falling knives is far greater than expected

For months, Tesla (TSLA.US) shareholders have been troubled by Elon Musk's role during President Trump's administration. However, the slight comfort brought by his official resignation from government positions last week quickly turned into fear, as the electric vehicle manufacturer's CEO had a heated argument with Trump.

According to Zhitong Finance APP, Tesla's stock plummeted 14% on Thursday. This followed a public conflict between Musk and the president over disagreements stemming from a tax bill proposed by Trump, with Trump threatening to terminate government contracts and subsidies with Musk's Tesla and SpaceX. According to S3 data, this drop wiped out $153 billion in Tesla's market value, marking the largest single-day decline on record, while short sellers profited $4 billion.

Although Tesla shareholders have long been accustomed to the stock's volatility, Thursday's plunge clearly demonstrated the extent of Musk's influence on the company's stock. While this drop may ultimately present a buying opportunity, some market observers have stated that attempting to catch a falling "knife" carries too much risk and is not worth the gamble.

After Trump won the election, Tesla's stock price surged significantly. Many believed that given Musk's close relationship with the then-elected president, this election would be good news for the company. However, behind the scenes, the outlook for the company's electric vehicle business has been deteriorating, and Musk's involvement in political controversies both domestically and abroad has deterred some buyers and sparked protests against the company. With Thursday's stock price drop, the stock has fallen 41% from its historical high in December last year.

According to market observers, the future trajectory of this electric vehicle manufacturer's stock seems fraught with uncertainty.

Wayne Kaufman, Chief Market Analyst at Phoenix Financial Services, stated:

"This whole situation is utterly ridiculous. People in such positions should be much more mature than middle school kids and shouldn't behave so childishly. This is particularly tricky for Tesla, as the company's value is inseparable from Musk himself. Tesla has always relied on Musk's influence to trade. When he appears to be visionary, the stock price rises. When he gets involved with DOGE, the stock price falls. After he exits DOGE, the stock price rebounds. Musk is the key figure driving the stock up, so clearly when he becomes the focal point of issues, the stock price will drop, and what happens next is anyone's guess. However, if Tesla itself had immense intrinsic value, it wouldn't be plummeting like this. Its stock price has never been based on fundamentals." Adam Sarhan, CEO of 50 Park Investments, pointed out:

Clearly, the relationship between Elon and Trump is no longer aligned. We are unclear what kind of consequences this will have, which is why people are selling off stocks. This is not the kind of issue that will have a clear conclusion or solution. If the situation worsens, I think it could indeed harm Tesla's earnings. They are two of the most influential figures on the planet, and if there is a personal feud, Trump is likely to come out on top. The impact on the stock is unpredictable. Right now, this is purely a gamble, and we haven't even considered that Tesla itself is already quite expensive. As the stock price falls, it may become more attractive, but I wouldn't feel comfortable saying it's cheap now.

Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management, believes:

This is a disaster for Musk. I don't know if there's a positive way to interpret this because it goes far beyond what any wise businessman should do. I can't imagine that after getting Trump into office, he would then turn Trump into everyone's enemy. The board will not take any action, and no one will protect Tesla's shareholders, and the only way to protect themselves is to sell their stocks. Personally, I sold some Tesla shares today. And we have been selling Tesla shares for years, and we still are.

Dave Mazza, CEO of Roundhill Financial, stated:

Clearly, the market outlook is quite pessimistic in the short term. This adds additional complexity, and the company's current situation does not need this complexity. People are overlooking the issues with car sales because autonomous ride-hailing is about to be launched, and people are willing to take a gamble in this area. But now, if these initiatives are targeted, and Musk himself becomes a target, then the "dream premium" will significantly decline, which is what we are seeing today.

Tom Orlik, Chief Economist at Bloomberg Economics, added:

Targeting Musk's companies would jeopardize the U.S.'s leadership in technology. From SpaceX satellites to Grok AI and Tesla electric vehicles, Musk's enterprises provide the U.S. with a competitive advantage in strategic areas, and giving up these advantages could be costly