Tesla Stock Slumps on Trump-Musk Feud: Buy the Dip in ETFs?

Wall Street wavered on June 5, 2025, as a highly publicized feud between President Trump and Tesla CEO Elon Musk unsettled investors. Tensions between the President and Musk reached a boiling point on Thursday, with a series of heated exchanges hitting headlines, as quoted on Yahoo Finance.Speaking from the Oval Office, Trump expressed “disappointment” in Musk, questioning the Tesla TSLA CEO’s motives in opposing what he described as his “big, beautiful” economic bill. In response, Musk fired back on X (formerly Twitter), stating that Trump would not have won the election without his backing — a comment that reignited their already strained relationship.Apart from being the CEO of Tesla and the rocket company SpaceX, Musk is the founder of The Boring Company, xAI and Neuralink. He also owns the social media platform X.Government Support for Tesla at RiskThe conflict escalated as Trump suggested that he might revoke federal subsidies and government contracts that benefit Musk's companies, including Tesla and SpaceX. Meanwhile, Musk declared that he would consider decommissioning SpaceX's Dragon spacecraft and went as far as to endorse Trump’s impeachment — going against his previously supportive stance.Note that SpaceX and Tesla benefit from a wide range of government programs, ranging from lunar launch contracts to electric car incentives. Musk's SpaceX has received tens of billions of dollars from the federal government over the last decade, including $3.8 billion in the fiscal year 2024 alone, according to federal records, as quoted on CBS News.SpaceX has taken more than $20 billion in contracts from NASA, the U.S. Air Force and other agencies since 2008, according to data from FedScout, as quoted on CNBC. Tesla shares slumped 14.3% on June 5. Shares gained 0.8% after hours. Note that Tesla has lost nearly $200 billion in market cap since Elon Musk left ‘DOGE,’ as quoted on MarketWatch.What Lies Ahead?Elon Musk was recently accused of losing focus on Tesla, and his political activities led to global protests and boycotts of the company's cars. In April, Tesla reported its lowest sales in three years. Many feared that Musk’s political involvement could keep hurting demand for Tesla cars.While Musk’s apparent distancing from Trump may help resolve the above-mentioned issues with Tesla sales, a lack of government support could pose a threat to the electric carmaker. In any case, Trump is known for backing fossil fuels and pulling down policies that favor EVs over traditional internal combustion engine vehicles. Any Silver Linings?Musk’s inclination for artificial intelligence (AI) could come across as a savior in this situation. Musk projects Tesla as an AI company. Tesla is heavily investing in AI, primarily focusing on autonomous driving (Full Self-Driving), humanoid robots (Optimus), and a custom supercomputer (Dojo). These initiatives can save Tesla stock to some extent, going forward, as AI is a hot proposition at present.Broker RatingTesla currently has an average brokerage recommendation (ABR) of 2.68 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 42 brokerage firms.Of the 42 recommendations deriving from the current ABR, 16 are Strong Buy and two are Buy. There are 13 Hold ratings while 10 analysts rate Tesla shares as a Strong Sell, with one recommending a Sell.Earnings estimate revision hasn’t been great either. One analyst out of 12 raised the estimate for the June quarter, while two cut down the same over the past one month. With the latest Trump-Musk clash, we expect estimates to come down further. Zacks Consensus Estimate for the June quarter dropped to 43 cents from 46 cents over the past month.What to do With the Tesla-Heavy ETFs?Against this backdrop, it is better to stay on the sidelines when it comes to investing in Tesla shares or Tesla-heavy exchange-traded funds (ETFs). Investors should closely watch what the government does in terms of supporting Musk’s companies.Tesla-heavy ETFs include Simplify Volt TSLA Revolution ETF TESL, Nightview Fund NITE NITE, Roundhill TSLA WeeklyPay ETF TSLW and Consumer Discretionary Select Sector SPDR Fund XLY.NITE lost 2.9% on June 5, while XLY retreated 2.5% and TSLW slumped 17.3%. Meanwhile, TESL fell 1.9%. The fund TESL uses an active management strategy to capture the potential of Tesla’s stock price movements, while implementing an advanced options overlay to manage downside risks. Hence, if you at all want to buy the dip in Tesla shares, you can tap ETFs like TESL that offer sufficient downside protection.   Want key ETF info delivered straight to your inbox?Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Tesla, Inc. (TSLA): Free Stock Analysis Report Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks