The brewing conflict between US President Donald Trump and businessman and special government advisor Elon Musk escalated on Thursday, leading to a public feud that could impact Musk’s tech companies. The future of AI regulation is also caught in the middle.
Trump’s budget bill, which contains many of the changes and agendas he campaigned on, is in discussion in the Senate. It includes an end to tax credits for electric vehicles and forbids states from regulating AI if those states want to maintain access to federal broadband funding.
Musk criticized the budget bill’s cuts to energy and electric car tax credits
Musk has been a close Trump ally and the driving force behind the temporary Department of Government Efficiency. Near the end of his intended 130-day role, however, Trump’s budget bill and Musk’s interests seemed to clash.
On May 26, Musk said he would step back from government work to focus on his several companies, including Tesla, SpaceX, and social media platform X.
On Thursday, Trump said in a post on Truth Social that Musk was “wearing thin” and that the president had asked him to leave. Musk “went CRAZY” over what Trump described as a removal of an “EV mandate” in the budget bill, Trump wrote. He suggested that the government could save money by eliminating the contracts Musk’s company holds with the government.
Throughout Thursday afternoon, Musk retaliated online, threatening to reveal information about Trump pertaining to the Jeffrey Epstein sex offender case. He also openly considered decommissioning the SpaceX Dragon spacecraft and then withdrew his threat.
Tesla Energy posted on X in May, opposing the bill’s proposed cancellation of tax credits on solar power, stating that the country needs solar to “support AI and domestic manufacturing growth.”
Potential impact on SpaceX contract and Tesla stock over time
Losing NASA’s contract would have a significant impact on both SpaceX and the science agency.
SpaceX vehicles are the only vehicles NASA possesses that can fly astronauts to and from the International Space Station. SpaceX is also the only company prepared to decommission the space station at the planned date in 2030.
As questions mount about the future of government partnerships and clean energy incentives, Tesla is already feeling the financial strain.
Tesla stock fell 14% on Thursday, settling at a year-to-date loss of 25%. Removing EV tax credits could lead to a decrease in sales volume. Sales are already down, as Musk’s government work displeased a customer base invested in relatively environmentally friendly vehicles.
According to Yahoo Finance, Tesla stock is likely to fall over time due to the political volatility of the brand.
Senate considering softening AI state regulation bill
The budget bill, as initially written, could have imposed a 10-year ban on state regulation of AI.
Supporters argued that federal regulations would be more effective than if each state set its own rules. However, both Democrats and Republicans opposed the bill. In the Senate, the bill was amended to say that states cannot create their own AI regulations if they receive federal broadband funding.
One supporter of the rule as written initially is OpenAI CEO Sam Altman, who in May told a Senate committee that a federal approach would be less “burdensome” than letting states make their own rules.
California has led the way in regulating highly advanced AI. However, Governor Gavin Newsom vetoed what could have been a precedent-setting bill in September 2024, stating that he did not believe restricting all large AI systems was the most effective way to prevent harm. The one area in which states have made significant progress on AI rules so far is in restricting deepfakes related to elections.
The budget bill also calls for modernizing federal IT systems and putting advanced artificial intelligence to work at the Department of Defense.
