How Musk's Political Drama With Trump Steers These 3 Tesla ETFs
Tesla Inc. (NASDAQ:TSLA) shares have been taking a bumper-car spin over the last few weeks, dropping 7% after a very public spat between CEO Elon Musk and President Donald Trump.
After Musk made a political mea culpa, the stock price spiked around 5% last week. But for ETF investors, the question on everyone’s mind isn’t an apology; it’s exposure.
The Musk-Trump Drama: Why It Matters For ETFs
Central to the drama is a proposed threat to Tesla’s regulatory lifeline: government subsidies and zero-emission vehicle (ZEV) credits.
When Trump threatened to strip federal benefits reaped by Tesla and SpaceX, Musk expressed support for impeaching the president. The back-and-forth rang the alarm bells of the EV investing community, particularly for ETFs with big Tesla holdings.
Musk subsequently retracted his comments, but the damage had already been done. The specter of policy whiplash now hangs over Tesla’s government-subsidized revenue streams, such as the ZEV credits that have generously buffered its balance sheet.
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The ETF Fallout (And Recovery)
Tesla’s whiplash was also reflected in its ETF entourage. Simplify Volt TSLA Revolution ETF (NYSE:TESL) and Roundhill TSLA WeeklyPay ETF (BATS:TSLW) jumped more than 6% and 5%, respectively, last week. Broader consumer-oriented ETFs such as XLY and Nightview Fund NITE (NITE) merely ticked up or fell.
These funds reflect the range of Tesla exposure:
TESL and TSLW provide focused Tesla bets with options overlays to control the risk of the downside, ideal in concept, but still susceptible to Musk-triggered turbulence.
The Consumer Discretionary Select Sector SPDR Fund (NYSE:XLY), provides diversified exposure but nevertheless includes Tesla as a leading holding, with more than 17% weightage at present.
NITE, with a 20%+ Tesla exposure, also demonstrates the way smaller (than single-stock funds) allocations can be moved by TSLA’s mood swings.
Robotaxis And AI To The Rescue?
Joining the narrative, Tesla will launch its robotaxi service “Cybercab” on June 22 in Austin, a likely market-moving moment. Analyst Dan Ives at Wedbush thinks this can be a defining moment that can help Tesla reach a $2 trillion valuation in the long term. He thinks AI is now the core growth driver of the company.
“We estimate the AI and autonomous opportunity is worth at least $1 trillion alone for Tesla and we fully expect under a Trump White House these key initiatives will get fast tracked (despite the Musk beef) as the federal regulatory spiderweb that Musk & Co. have encountered over the past few years around FSD/autonomous clears significantly under Trump given his focus on AI dominance over China,” said Ives. “We believe Tesla could reach a $2 trillion market cap by the end of 2026 in a bull case scenario. The $1 trillion of AI valuation will start to get unlocked in the Tesla story and we believe the march to a $2 trillion valuation for TSLA has now begun in our view with FSD and autonomous penetration of Tesla’s installed base and the acceleration of Cybercab in the US representing the golden goose.”
Tesla is doubling down on AI, plowing forward with its Dojo supercomputer, Optimus humanoid robots, and Full Self-Driving tech. If AI becomes Tesla’s central narrative, it can provide a story pivot ETF investors will believe in.
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