Elon Musk Profits From Trump, Democracy Suffers

Another excellent piece by our friend Hal on some of the economic and democratic implications of the Trump-Musk partnership.

President-elect Donald Trump walks with Elon Musk before the launch of SpaceX’s sixth Starship rocket test in Brownsville, Texas, November 2024. Image: Brandon Bell/Reuters.

By Harral Burris

Elon Musk made a calculated business decision in the months leading up to the election. If he invested $200 million in the Trump campaign and Trump won, the potential returns for Musk's various business enterprises would likely be excellent. He was correct, at least so far.

On the day before the election, shares of Musk's only publicly traded company, Tesla, closed at $251. On Friday, December 13^th, they closed at just over $436, a whopping 75% gain. The value of the Tesla shares Musk personally owns has increased by over $200 billion. SpaceX, Musk's privately owned rocket company, has seen its value jump 67% since the summer. CNBC reports that SpaceX's valuation has surged to $350 billion, with Musk holding most of the ownership.

The valuation increases on Tesla and SpaceX have padded Musk's net worth by around $400 billion since he helped Trump regain the White House. A $200 million investment resulted in a rapid $400 billion gain. If a return on investment (ROI) of 90% is excellent over the course of a year or two, an ROI of 2000% over a month is hard to fathom. Politics aside, Musk's paltry $200 million donation to Trump might be the greatest single investment of all time.

The valuations of Musk's various enterprises have reached ridiculous levels. No one should own Tesla at these prices, but if recent developments are any indication, investors will need to own Musk aggressively. Tesla is the only regularly traded way to get a piece of Elon.

Trump is all about money, and since Musk is the wealthiest person ever, executive decisions will likely follow Musk's preferences. The Financial Times reports that Trump seems likely to end the $7500 tax credit now available to those who purchase an EV, boosting Tesla's competitive advantage against newcomers to electric vehicle (EV) sales. While Tesla makes money from its EVs, competitors need the $7500 subsidy to stay in business. Wedbush analyst Dan Ives states, "A Trump presidency would be an overall negative for the EV industry. However, for Tesla, we see this as a huge positive." In addition, the Trump administration will likely push for swifter regulatory approval for autonomous driving technology, helping the development of Musk's much-hyped robotaxi.

Just be warned that an investment in Tesla at these levels is a vote on the future of the Trump/Musk bromance. If that relationship sours, Musk could find himself suddenly out of favor. If he doesn't constantly stroke Trump's ego, he will likely face Trump's scorn and investor wrath.

If Tesla is considered overvalued, SpaceX is off the charts compared to other defense contractors.

After a post-election surge in valuation, SpaceX is the most valuable defense contractor in the world. Its value has increased by roughly $200 billion, more than the value of Lockheed Martin. SpaceX is a private company, so mere millionaires cannot get in on the action, but Musk's billionaire buddies are lining up for a piece of SpaceX, no matter the cost. Musk has convinced the public that he has the Midas touch like Rockefeller, Carnegie, and Ford before him. To get rich, one simply lines up behind the plutocrat.

The big money isn't clamoring for a piece of SpaceX because Starlink has suddenly become more profitable or because rocket launches are more frequent. Instead, they're buying into Musk's proximity to Trump. What these billionaires are willing to pay for a piece of SpaceX makes no economic sense. SpaceX has revenues somewhere in the region of $15 billion a year, a tiny fraction of the revenues of its competitors. RTX (parent company of Raytheon) has $79 billion in annual sales, Boeing $73 billion, and Lockheed Martin $71 billion.

According to the Stockholm International Peace Research Institute, the world's 100 largest defense contractors hauled in $632 billion in revenues last year. So, with a mere $15 billion in revenues, SpaceX is a small fish in the defense industry. Its crazy high valuations have nothing to do with business and everything to do with money and politics. Fat cat investors expect Musk to steer government money into private coffers, and that's a safe bet. Expect Trump to spend much more of the Pentagon's money on space, particularly Musk’s SpaceX.

NASA is in the bag. Last week, Trump tapped one of Musk's billionaire buddies, entrepreneur Jared Isaacman, to run NASA, the most important source of funds for SpaceX. Isaacman is not a space neophyte; he was part of the first civilian crew to reach orbit and later participated in the first commercial spacewalk.

Musk's SpaceX carried out both of Isaacman's private space missions. Like all commercial space firms, SpaceX depends on government contracts from either NASA or the Pentagon. Musk's competitors, like Jeff Bezos' Blue Origin and Boeing, have grave concerns. Former NASA official Charles Miller says, "Everybody in the space industry is worried about Elon's influence right now." That is likely an understatement.

SpaceX has received just under $20 billion in federal contracts since 2008, including $3.8 billion in 2024, according to the database of federal contracts at USAspending.gov. Now, the new NASA contracts will come across the desk of one of Musk's friends. No wonder Bezos is worried. It doesn't help that he and Musk are not exactly best friends.

The Musk takeover of large swaths of the government continues. Trump appointed venture capitalist David Sacks, another of Musk's billionaire pals, to the newly created AI and crypto Czar posts. Sacks’ job will include coordinating federal policy and government use of technology. Trump said Sacks would also lead the Presidential Council of Advisors for Science and Technology.

Sacks, 52, is part of Silicon Valley's "PayPal Mafia," along with Elon. That is where they started as entrepreneurs and investors. They are both South African expatriates, and they've been friends and business associates for decades. So, along with electric vehicles, robotaxis, and rockets to the moon, Elon has his AI ventures covered. Musk owns xAI and has openly feuded with rival CEOs, including OpenAI's Sam Altman and Google's Sundar Pichai. Expect Musk to get a leg up in this industry as well. He will benefit from government favoritism and protection against penalties for breaking the law.

Then there's China. Trump may look and sound like a China hawk, but his actions do not match. On the campaign trail, Trump denounced the bipartisan CHIPS Act, arguably the most important piece of industrial legislation since the 1970s, fueling federal government investment in domestic microchip production. In his first term, Trump saw TikTok as nothing more than Chinese spyware in American phones. Some of his billionaire campaign contributors are investors in TikTok, so now he's not so sure it's a problem.

As Trump's advisor-in-chief, Elon Musk has busied himself suggesting appointees who favor an accommodative approach toward China. A recent story in the Financial Times detailed Musk's deep business connections with China, which would suffer from a hard-line U.S. policy.

Musk has connections at the very top of the Communist hierarchy. He is currently in negotiations concerning Tesla's self-driving feature and future robotaxi business in China. Tesla has received billions of dollars in cheap loans, subsidies, and tax breaks directly from Xi Jinping's government. Musk's largest factory, located in Shanghai, sells cars in the Chinese market and sends China-built cars to other Southeast Asian countries. All of this depends on the continued consent of Chairman Xi.

Is Musk interested in America's China policy? Of course, he is. He will push Trump to make deals…that benefit Musk’s companies.

I can think of no other instance in American history when a single unelected individual wielded this much power over the U.S. government, with the clear objective of enriching himself. Musk surpasses the robber barons of the late nineteenth century. He is the richest fat cat and the closest presidential whisperer of our time. And his greed is unbounded. The implications for democracy are scary.

Hal is a retired investment professional with 40 years of experience in money management. The interface between geopolitics and global investments has always been his area of specialization. History has always been one of his interests and passions, in fact, that’s how Hal and Jeremi became friends in Madison, Wisconsin.