Tesla Inc. saw its shares tumble nearly 7.6% on July 7, 2025, erasing over $50 billion in market capitalization, after CEO Elon Musk announced the creation of a new political entity—the America Party. The announcement triggered investor panic, amplified by former President Donald Trump’s criticism, who labeled the move “chaotic” and “disruptive to business.”
The timing exacerbated market volatility already intensified by Trump’s proposed 60% tariffs on select foreign nations, prompting a 1.4% drop in the S&P 500 and a 1.8% decline in the Nasdaq. With Tesla’s stock often viewed as a bellwether for growth sentiment, its sharp decline rattled tech-heavy indices and investor confidence across sectors.
Tesla’s dip on July 7 followed a disappointing Q2 report, which showed 1an 1% year-over-year decline in deliveries, marking the company’s third straight quarterly slump.
Wall Street Pushes Back: Leadership or Liability?
Amid mounting investor anxiety, Wedbush Securities analyst Dan Ives issued a stark note: “Tesla is entering a danger zone.” He warned that the board needs to step in and impose “guardrails” on Musk’s public ventures outside of Tesla. Ives suggested re-evaluating Musk’s performance-based compensation, which could pay him billions in stock options if Tesla Stock hits specific milestones, despite external distractions.
Musk responded on X (formerly Twitter) with a blunt “Shut up, Dan,” triggering another round of media frenzy and investor concern about Musk’s temperament. Still, Wedbush maintained its “outperform” rating and $500 price target, citing Tesla’s strong fundamentals and upcoming AI initiatives.
Other analysts were less forgiving. JPMorgan downgraded Tesla’s Stock rating to neutral, projecting further stock erosion if Musk’s political ambitions continue to dominate headlines.
The Uphill Battle of Building a Third Party
Musk’s newly announced America Party is described as a centrist, tech-forward movement focused on fiscal discipline and innovation. Yet political analysts argue the logistical and financial hurdles are immense. A successful national party must gain ballot access in all 50 states, which historically requires $500 million to $1 billion and extensive grassroots infrastructure.
A Reuters/Ipsos poll found only 14% of likely voters would consider backing a third party led by Musk, despite his net favorability rating of 36%, trailing both Trump and Biden. While Musk commands a large online following, experts say internet charisma does not always translate into political votes or institutional trust.
Former President Trump also took a jab at the initiative, calling it a “vanity stunt,” and claimed third parties only serve to “split the vote and elect the opposition.”
Tesla’s Stock market stumble reflects growing investor concerns over Elon Musk’s split focus between corporate strategy and political disruption. With the America Party in its infancy and regulatory headwinds mounting, Tesla’s leadership must now walk a delicate line between innovation and distraction. As the world watches, the question isn’t just about Tesla’s share price, but whether its CEO can lead in business without losing sight of his core responsibilities.
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Sources:
https://www.cnn.com/2025/07/07/business/tesla-stock-musk-trump-intl
https://www.nytimes.com/2025/07/07/business/tesla-stock-elon-musk-america-party.html
