Tesla’s stock (NASDAQ:TSLA) took a steep dive Monday morning following CEO Elon Musk’s announcement of his plan to launch a new political organization called the “America Party.” Investors reacted with concern over whether Musk’s political pursuits might distract him from leading Tesla’s core operations. Pre-market trading showed shares plunging more than 7%, with the price dropping to $292.80 as of 04:22 ET (08:22 GMT).
In a report released Sunday, Wedbush Securities warned that Musk’s growing involvement in politics could put downward pressure on Tesla’s stock. The firm noted that Musk’s political ambitions seem at odds with what shareholders want, especially as Tesla navigates slowing vehicle sales and prepares to expand its autonomous driving technology.
Musk’s political move also comes amid a public feud with President Donald Trump, centered around the recently passed “Big Beautiful Bill,” adding another layer of uncertainty.
Wedbush highlighted that while investors initially welcomed Musk stepping back from his Dogecoin-related activities, this new political endeavor could mean more distractions ahead. The analysts said, “Tesla’s shares may face headwinds as investors speculate on how Musk’s political positioning might impact his ties with Trump and the broader Republican Party.”
The brokerage also pointed out the historical difficulties faced by independent political parties in the U.S., suggesting Musk’s political involvement could introduce unforeseen risks for Tesla. They hinted that Tesla’s board might have to intervene if Musk’s political engagement intensifies.
Despite these concerns, Tesla’s stock has declined nearly 17% year-to-date. Although it has partially recovered from recent lows, ongoing worries over declining sales and Musk’s political ventures continue to dampen investor confidence.
Wedbush kept its “Outperform” rating on Tesla with a $500 price target, citing strong belief in the company’s advancements in AI-driven technology. Recently, Tesla launched trials of its autonomous driving service in Austin, Texas, but the market reaction was lukewarm. The company is also advancing its robotics efforts through the Optimus project, which Musk aims to have in production by 2026.