Musk is ‘dialing back’ on conflict with Trump under regulatory threat, says ARK CEO Cathie Wood

Wood’s comments come after Musk departed the Department of Government Efficiency. On Tuesday, Musk criticized Trump’s “One Big Beautiful Bill,” saying it would increase the national deficit and undermine DOGE’s cost-cutting efforts. In response, Trump questioned Musk’s contributions and threatened to cancel federal contracts with Musk’s companies, including Tesla and SpaceX.

On Thursday, Musk alleged that Trump appeared in unreleased Jeffrey Epstein files. Trump dismissed Musk as having “lost his mind.”

On the same day, Musk also threatened to decommission Dragon spacecraft, a space capsule used to transport astronauts and supplies to and from the International Space Station. But a few hours later, he pulled back the threat, saying he wouldn’t follow through.

This, according to Wood, is a sign that Musk is backing down from his conflict with Trump.

This public rift between Musk and Trump will have deep implications for not only U.S. politics, but also Musk’s business ventures. Investors are worried that a worsening relationship between the two could lead to a less friendly regulatory environment for companies Musk is involved with.

SpaceX has $22 billion in government contracts, said Wood. She added that regulation of autonomous taxi platforms could impact the speed of their rollout—which could impact the robo-taxi service Tesla plans to launch in Texas later this month. (Neuralink, another Musk-owned company that is developing brain-computer interfaces, is subject to FDA regulation, as well.)

It’s possible that the fight with Trump was orchestrated by Musk as part of a plan to disengage from the government and being associated with the Republican party, said Wood, especially as Trump is acting tough on China—an important market for Tesla both in terms of consumption and production.

“He certainly doesn’t want to be impaired there,” said Wood.

Tesla didn’t immediately respond to Barron’s request for comment.

Regardless, Wood remains confident in Musk, noting that he “works really well under pressure.” Musk has said that his role is to help the U.S. get out of a budget deficit through accelerated economic growth. Wood thinks the board at Tesla should encourage him to get back to that priority.

In terms of her own investment with Tesla, Wood said she is used to volatility in her portfolios—and has been adjusting her holdings in the stock to take advantage of such dramatic price moves. She noted that ARK net sold nearly half a billion dollars of Tesla shares after the 2024 presidential election, expecting some turbulence down the road.

“We try to use the volatility to our advantage,” she said, “Dialing down exposure as the stock soared is part of active management in the [exchange-traded fund] wrapper.”

The fallout between Musk and Trump propelled Tesla stock to drop 14% on Thursday, wiping out more than $150 billion in market value. Share prices recovered somewhat on Friday, with the stock finishing 3.7% higher.

Wood has been a long-time Tesla bull, and believes that the electric vehicle company can dominate the highly profitable and scalable robo-taxi business—on-demand rides with driverless cars—thanks to its leadership in autonomous driving technology. She has a price target of $2,600 for Tesla stock by 2029, nearly nine times its current price.

By the end of the first quarter, ARK owned nearly 3.3 million shares of Tesla stock worth $928 million. While that’s only 0.1% of Tesla’s total shares outstanding, it made up 7.6% of the firm’s total holdings, according to the firm’s 13F filings.

Some of ARK’s funds have even higher exposure. Tesla is the top holding of the ARK Innovation ETF, the company’s flagship fund, with a 10.3% weight as of Friday. The stock also makes up 10.8% of the ARK Autonomous Technology & Robotics ETF and 6.9% of the ARK Next Generation Internet ETF.

Write to Evie Liu at [email protected]