Why Is Tesla Stock Falling?

Tesla stock reached an all-time high of $479.86 on December 16, 2024. At the time, investors were eager to see how the economy would change when Donald Trump became president the following month. The overall market was up, but Tesla looked especially appealing because Elon Musk had become one of Trump’s closest advisors. There was considerable potential for the entrepreneur to shape federal policies in ways that would help his businesses thrive.

Less than a month into Trump’s second term as president, Tesla investors have started hedging their bets, putting the company on a trajectory that could lead to a pre-2024 value.

Let’s take a closer look at recent events to see why some investors have lost faith in Tesla and Musk.

Musk Has Spread Himself Too Thin to Lead a Growing Company

A recent spat with OpenAI’s CEO Sam Altman forced many investors to question how Musk spends his time. Musk, who helped found OpenAI as a nonprofit in 2015, sued the company and Altman in 2024. About a year later in February 10, 2025, Musk and a group of investors offered to purchase OpenAI. OpenAI rejected the offer, which was far below the company’s valuation.

Musk is also known for late-night social media posts, fathering 13 children, and dominating online video games. When does he have time to sleep, let alone manage Tesla?

This is the question investors have started asking, and they can’t come up with answers that make them feel confident about his ongoing leadership. In response, they’ve started selling their shares in Tesla.

Musk’s Recent Politics Don’t Align With Tesla’s Mission

Over the last few years, Musk has become a prominent supporter of the Republican Party and other conservative political groups around the world. While Musk has the right to his personal beliefs, his recent political activities mean he’s been sledding uphill trying to realize Tesla’s mission because half the buyer base has an alternative viewpoint.

Musk donated about $290 million to Donald Trump’s 2024 presidential campaign. After taking office, though, Trump announced that he would roll back some key federal programs that would help Tesla succeed. For example, on his first day in office, President Trump reversed a 2021 executive order that encouraged electric vehicle manufacturing and sales.

Trump’s 2025 executive order also blocks federal funds intended to help companies like Tesla build a network of EV charging stations across the country. Trump has also promised to end a $7,500 federal tax credit that makes it easier for consumers to purchase EVs.

Furthermore, President Trump has declared a “national energy emergency” and promised to increase oil drilling in the U.S., curtail the EPA’s authority, and defund electrification programs that would integrate more renewable energy sources into the grid.

The clash between Musk’s politics and Tesla’s mission to create more EVs, solar panels, solar roofs, and residential solar batteries isn’t lost on investors. While Tesla’s price soared for a while after Trump’s victory, it lost many of those gains as Inauguration Day neared. Shares fell so much that Musk lost an estimated $106 billion between December and mid-February.

The falling value could continue as Trump ramps up his trade war with countries like China. China has been at the forefront of EV technology, but everyone has expected Tesla to move into the market and capture sales. Retaliatory tariffs from China, however, would likely make Tesla vehicles far too expensive for Chinese consumers.

The only hope is that Musk can convince Trump to carve out expectations that help Tesla enter more international markets. Even if that happens, the end of federal funding will likely stall Tesla’s sales within the U.S.

What Do Tesla’s Finances Say About the Company?

Tesla’s financial documents reveal a mixed bag of pros and cons.

On the negative side, the company produced and delivered fewer vehicles in 2024 than in 2023. Even worse, the company has had two years of declining gross profits. 

On the plus side, Tesla revenues have been climbing for the years as the various suite of automobiles have become more accessible with nearby charging stations and Tesla dealerships entered new markets.

Unfortunately, Tesla might not have the capacity to meet growing interest. The company has speculated about opening a factory in Mexico to help meet demand, but new tariffs make that plan less feasible.

Should You Buy, Hold, or Sell Tesla Shares?

Research shows a Hold consensus, with 14 Buy ratings, 15 Hold ratings, and nine Sell ratings.

There are a lot of opinions about how investors should respond to Tesla’s falling share value. One perspective says that this is a good time to buy shares at a discounted price. That plan’s success, of course, depends on whether the company can right its ship and increase its value.

Another perspective says investors should sell off their Tesla shares to avoid losing more money. This probably makes sense to investors who are concerned about Musk spreading himself too thin. If you don’t believe a single person can run several companies and a government task force, you might want to unload any shares you own.

The third — and most popular — perspective encourages current investors to hold their shares and watch the company’s performance closely. At this point, it’s nearly impossible to know whether Tesla can succeed without Musk’s daily leadership.

It’s also possible that Musk will lose his CEO seat, creating an opportunity for Tesla to bring in someone more dedicated to the company’s core mission. That sounds like a long shot to many, given that Tesla approved a pay increase for Musk just last year. Then again, Musk’s scattered priorities weren’t as obvious at the time. More decision-makers might now see Musk as a risk to Tesla’s future.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.