Tesla Inc (NASDAQ:TSLA) CEO Elon Musk has recently become embroiled in a geopolitical subplot involving U.S. President Donald Trump, Chinese netizens and a new potential self-created political party.
It sounds like something out of a science fiction political satire, but the consequences could be quite real for investors, particularly those holding Tesla-loaded ETFs.
As Musk engages in a heated exchange with Trump over the latter’s so-called One Big, Beautiful Bill, a broad policy package that Musk asserts will raise the U.S. debt ceiling by $5 trillion, investors might want to fasten their seatbelts.
Not because Musk could start a new political party, but because the billionaire’s increasingly overt political tantrums might bring a different kind of headline risk into Tesla, and by extension, any ETFs that own it.
The Political Plot Thickens
In the newest installment in this long-running drama, Chinese Weibo users on social media, basically China’s Twitter, have been coming out in support of Musk. The viral hashtag #MuskWantsToBuildAnAmericaParty has seen people expressing their ardent (albeit somewhat tongue-in-cheek) backing of the billionaire’s American politics vision.
Musk’s remarks weren’t solely directed at the bill; they were aimed at the politicians themselves. He stated on X that Trump-supported legislators would lose their primaries “if it is the last thing I do on this Earth.” Trump fired back, writing on Truth Social that Musk “would probably have to close up shop and head back home to South Africa” had it not been for government subsidies.
So… Why Should ETF Investors Care?
Because Tesla is a darling of many broadly held ETFs.
Invesco QQQ Trust (NASDAQ:QQQ): Tesla ranks in the top 10 holdings.
ARK Innovation ETF (BATS:ARKK): Cathie Wood’s flagship fund is one of the most outspoken and exposed supporters of Tesla.
SPDR S&P 500 ETF Trust (NYSE:SPY) and iShares Core S&P 500 ETF (NYSE:IVV): Tesla’s inclusion in the S&P 500 means even “safe” index funds have some stake in this game.
Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV) and iShares U.S. Technology ETF (NYSE:IYW): Thematic plays in which Tesla is a substantial drag.
With Musk’s political commentary ratcheting up and now going viral abroad, investors are concerned about how much his personal brand and capriciousness may put pressure on Tesla’s stock price.
Can This Spur An ETF Revamp?
A few industry observers are already wondering if Musk’s cantankerous ways might give rise to more specialized ETFs, either embracing the “Musk universe” or excluding companies with high CEO discretion risk. These could be a MUSK ETF, following companies headed by or owned by Elon Musk, including Tesla, Neuralink, SpaceX (through private equity surrogates), xAI, and even X-adjacent trades; or a Corporate Neutrality ETF, minus companies where executive conduct has become a source of stock-specific risk.
In a social media, a sentiment-driven market with the concept of “political volatility screening” in building ETFs may not be as outlandish as it appears.
The China Curveball
And then there is the China aspect. The unexpected deluge of pro-Musk sentiment on Weibo would boost Tesla’s brand in China, where the automaker already has a sizeable EV presence. But it also lands Musk in a diplomatically sensitive position geopolitically, with China and the U.S. already involved in a fierce tech and trade competition.
ETFs with global exposure to Tesla, such as iShares Global Clean Energy ETF (NASDAQ:ICLN) or KraneShares Electric Vehicles and Future Mobility Index ETF (NYSE:KARS), may face increased pressure if tensions rise further.
Bottom Line
Ultimately, Musk is more than a CEO. He’s a geopolitical player. And though that may keep X abuzz, it could also mean that your ETF is along for the ride in a car with no brakes.
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