What Musk and Trump risk losing in their high-stakes breakup

The aftermath of Donald Trump and Elon Musk’s showstopping breakup raises the question: Who has the most to lose?

In one of the most consequential moments, Trump threatened to pull billions of dollars in federal contracts from Musk’s companies. If that happened, it would ripple across Musk’s business empire, including SpaceX, which launches astronauts for NASA and satellites for the Pentagon.

Underneath the drama is genuine political and financial risk for both billionaires.

Tesla, the electric-vehicle company that Musk helms as CEO, lost $152.4 billion of market value Thursday—the biggest one-day decline in its capitalization in the company’s history. Trump can’t lose more than three votes from Republican House members or his “big, beautiful bill" will be derailed. Members of the House Freedom Caucus have already been difficult to corral, airing concerns about the bill’s contributions to the deficit, the same argument Musk has made against it.

Here’s what’s at stake:

Elon Musk

Musk, the CEO of Tesla, SpaceX and xAI, has billions of dollars in government contracts and is pushing for changes to federal regulations to deliver on his promise to investors that he will transform Tesla into an AI and robotics giant worth trillions of dollars.

Trump threatened to terminate government contracts with Musk’s companies on Thursday—an idea the president’s allies have been pushing since the SpaceX CEO started attacking Trump’s cornerstone legislative bill earlier this week, according to a person close to the president.

Musk’s SpaceX has worked closely with the government for years, building close connections with the Pentagon, the intelligence community and NASA. The company frequently blasts off military payloads, and NASA is largely beholden to SpaceX for some of its most high-profile missions.

An administration official said Musk will find it extremely difficult to find a sympathetic voice in the Trump administration now.

Fritz Kocher sits in the back of his Tesla Cybertruck in Texas last month while waiting to watch the SpaceX Starship rocket launch.

Tesla

To roll out a nationwide fleet of self-driving cars, Tesla needs regulatory changes at the federal level, which he has been pushing for. Currently, states control whether self-driving vehicles operate on public roads.

In April, Transportation Secretary Sean Duffy visited Tesla’s headquarters in Austin. “We’re here in Austin, Texas, at the Tesla factory with Elon Musk, the great," Duffy said in a video posted on X. “Obviously, it would be wonderful for the United States to have a national set of rules for autonomous driving," Musk said in the video.

Tesla is expected to roll out its first taxi service powered by self-driving cars in Austin later this month, as it gears up to compete with Waymo.

Musk has long blamed regulatory hurdles for the company’s inability to roll out autonomous driving features. Many of Tesla’s investments in self-driving cars and humanoid robots are fueled by Tesla sales, which have fallen sharply in the U.S. and across Europe in recent months as Musk and Trump’s relationship grew closer.

A bigger blow to Tesla could come from White House efforts to weaken fuel economy and emissions rules. Tesla earns hundreds of millions of dollars every quarter from regulatory credit sales to rival carmakers who need to buy them to avoid fines for exceeding tailpipe emissions caps. Last month, Congress voted to eliminate California’s ability to set its own limits on tailpipe emissions, effectively killing one of the biggest drivers of EV investment in the U.S.

SpaceX

SpaceX works hand-in-glove with the U.S. government across multiple contracts worth billions and billions of dollars. Several government agencies use its Falcon rockets, in-orbit space vehicles and Starlink, a network of more than 7,500 internet satellites that has also drawn attention for its role supporting Ukraine’s battle against Russia.

SpaceX needs air-safety regulators to review its flight plans and environmental agencies help regulate company plans for launch sites. In April, it landed a $5.9 billion contract to launch national-security payloads for the military.

Musk’s company is the only U.S. space firm regularly transporting astronauts to and from the International Space Station. In 2022, NASA awarded SpaceX five more crewed space-station flights, bringing the company’s total contract for such operations to nearly $5 billion.

SpaceX is also a big part of NASA’s flagship human-exploration program, with about $4 billion in contracts to develop its Starship vehicle for future astronaut visits to the moon. NASA picked SpaceX to work on a spacecraft that would allow it to safely deorbit the space station in 2030—a deal worth up to $843 million.

SpaceX has struck agreements with U.S. spy agencies, too, including a $1.8 billion classified deal with the National Reconnaissance Office, an agency that operates surveillance satellites.

Musk had looked likely to win more significant deals under the Trump administration. SpaceX, working with two others, wants in on the president’s missile-defense program called Golden Dome for America.

Donald Trump

Trump has pushed his entire legislative agenda into one massive bill, a mix of tax cuts, funding for the border and cuts to programs such as Medicaid and food stamps. The bill narrowly passed the house by a vote of 215-214 and is now working its way through the Senate before it will be voted on again by the House. Musk’s opposition to the legislation could derail it.

Musk said the bill would add $2.5 trillion to the federal deficit, calling it a “disgusting abomination" and threatening to fire politicians “who betrayed the American people." His arguments could resonate with deficit-minded lawmakers.

The billionaire could also tap the massive war chest he used to support Trump in last year’s election, funding primaries against lawmakers who support the bill, or putting his money to work in more subtle ways to sway Republicans to vote against the bill. Musk donated more than $250 million toward re-electing Trump, and said Thursday that Trump would have lost the election without his support. “Such ingratitude," he posted on X, the social-media platform he owns.

Senate Majority Leader John Thune (R., S.D.) speaks to members of the media on Thursday.

As legislators tried to parse the vitriolic rhetoric Thursday, most Republicans still appeared to be galvanized behind the president. But Musk only needs to pull away a handful of dissenters.

White House aides said they feel Musk’s broadsides against Trump would weaken those Republicans who had initially viewed the billionaire’s comments about the bill as helpful to their cause. The thinking is that Trump voters will, as they have time and again, rally to the side of the president.

Musk has received public support from only three House Republicans, including Reps. Thomas Massie (R., Ky.) and Warren Davidson (R., Ohio), who previously voted against the bill. Rep. David Schweikert, an Arizona Republican who missed the first vote, told The Wall Street Journal on Thursday that he wants “multiple changes" to the bill before he will support it.

“Is this the moment where Republicans and everyone in the country start to understand the threat and the scale of financing this debt?" said Schweikert, who is seen as vulnerable in the midterm elections next year. On the debt, he said: “Musk is absolutely right."

A senior Republican member of the House Financial Services Committee said that Musk’s comments are not helpful in trying to pass Trump’s bill. He added the argument with the president will likely have negative residual effects on Musk’s relationship with Republican lawmakers.

Longer term, a permanent split between Musk and Trump could hurt Republicans’ chance at maintaining their razor-thin majority in the House in the 2026 midterm elections given the importance of having the support of the businessman’s massive following on X for the GOP to pick up wins in the midterm elections.

On Thursday, Musk mused about starting a new political party, asking his 220.5 million followers on X if they’d support creating one. By Thursday night, more than 81% of the roughly 3.5 million respondents were in favor.

Write to Brian Schwartz at brian.schwartz@wsj.com and Micah Maidenberg at micah.maidenberg@wsj.com