On April 2, just 71 days into his second term, the US president told aides that South African-born Musk, who immigrated to America from Canada 33 years ago, would step back as the head of the Department of Government Efficiency or DOGE within weeks and return to his businesses including his struggling listed flagship, Tesla.
Musk, 53, who spent more than a quarter of a billion US dollars of his own money to help the President get re-elected last November, emerged as America’s co-leader as well as the chief confidant, cheerleader and a much-derided hatchet man for Trump. Musk has also become the most feared political donor in America, threatening to use his financial muscle in electoral races at the state and national levels to support candidates he likes or derail the candidacies of those he loathes.
While holding no position in the government, Musk has shadowed Trump from the White House’s West Wing to Mar-a-Lago, the President’s private Florida home. He regularly hung around the Oval Office or the patio of Mar-a-Lago, where Trump holds court or meets supporters. He even sat in the President’s meetings with his own business rivals like Amazon.com’s founder, Jeff Bezos.
Although not a cabinet member, Musk attended and reportedly dominated discussions in cabinet meetings, donning a T-shirt and black MAGA hat. He even turned the White House into a temporary Tesla showroom when he brought in cars, including one that Trump said he was buying and other models, including a Cybertruck. TV footage of Trump checking out Tesla cars in the White House was equivalent to tens of millions of advertising dollars. Clearly, US$277 million ($372 million) in campaign contributions to a presidential candidate can buy a lot of access.
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Yet, Musk is not leaving because he and Trump have been arguing over policies or what each has been doing over the past two and half months but because Washington DC and his deep involvement in politics have been taking a toll on his three main businesses — EV maker Tesla, space firm SpaceX and AI start-up xAI, which now includes X, formerly Twitter, his beleaguered social media firm.
The billionaire has also become a political liability for Trump whose supporters mostly working class Americans. Musk, whose net worth peaked at nearly half a trillion in mid-December (or US$487 billion, to be more precise, according to Bloomberg Billionaires), is currently worth US$345 billion. Tesla shares, which peaked at US$488 in December, plunged 56% through to mid-March. In a speech in Wisconsin last week, Musk said his role with DOGE, which is pushing for widespread government job cuts to pare costs, has created a backlash against Tesla and has hurt its stock. “What they’re trying to do is put massive pressure on Tesla and me, I guess, to stop (me from) doing this,” Musk said.
Tesla’s stock has since rebounded slightly, including a 5.3% rally on April 2 on news that Musk was headed back to fix things at Tesla, where sales domestically and in China and Europe have been plummeting in recent months. Meanwhile, Tesla’s main global rival, China’s BYD Co, has been expanding sales at home and abroad.
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Tesla CEO’s impending return to his businesses comes in the wake of a bunch of bad news for him and Trump. On April 1, Trump’s Republican Party narrowly won special elections for two House of Representative seats, which they had won handily five months earlier. In both cases, rival Democrats cut Republican majorities by over half in constituencies that have long been Trump strongholds. A bigger loss for Republicans this past week came in Wisconsin, where in an election for the state’s Supreme Court judge, Susan Crawford, a candidate backed by Democrats, beat Brad Schimel, who Elon Musk and other wealthy Republicans bankrolled.
‘Buying’ a judge
Elections for state judges are generally bipartisan races where voters choose from two or more senior judges. However, in Wisconsin, one of the most divided states in America, Democrats and Republicans each backed a candidate in last week’s election. Musk ploughed over US$25 million of his own money in the contest, where both sides spent nearly US$50 million each. It was reportedly the most expensive election for a judge in US history.
But Musk didn’t just give money. He personally campaigned for three weeks, making long, passionate speeches for the conservative former state Attorney General he was backing. Musk claimed the Wisconsin election would not only decide the trajectory of America but perhaps all of “Western civilisation” and “the future of the world”. Democrats turned the race into a contest preventing the world’s richest man from buying a judge. Tesla currently has a case pending in Wisconsin that the state Supreme Court will hear later this year.
“I expected to lose, but there is value to losing a piece for a positional gain,” Musk said in an X post after the results were announced. Trump’s former chief strategist Steve Bannon called the Wisconsin elections “a wake-up call”. He noted that “Elon was in every ad,” attacking Republican-backed candidate. “I think Elon was in the ads more than Trump was”.
In some ways, Musk was never meant to be in Washington for long. The Tesla, SpaceX and xAI CEO was given a “special government employee” designation as leader of DOGE to avoid making him subject to the same financial disclosures as all other full-time government employees or cabinet ministers. But that designation also comes with a work limit: 130 days out of a 365-day year.
As he charts his return to business, Musk is rearranging the deck. On March 28, Musk announced that his artificial intelligence firm xAI, better known for its AI chatbot Grok, was buying his social media platform X (formerly Twitter) in a share swap deal. The transaction valued xAI at US$80 billion and X’s enterprise value at US$45 billion — US$33 billion of equity plus the US$12 billion of debt that remains on X’s books.
Musk purchased Twitter for US$44 billion three years ago, renamed it X, fired more than 80% of its staff and saw the bulk of its ad revenues evaporate in months. By January this year, the value of X had sunk to US$12 billion, according to The New York Times, which cited data from mutual fund giant Fidelity Investments, which had helped Musk buy the social media firm then called Twitter.
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Musk way overpaid for Twitter. Many analysts thought it was not even worth half of the US$44 billion he forked out. Now, through a series of complex financial engineering and share swaps with another of his firms, he can claim that he has recovered most of his original investment. “xAI and X’s futures are intertwined,” Musk wrote on X on March 28. “Today, we officially take the step to combine the data, models, compute, distribution, and talent. This combination will unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach.” He then gushed: “This will allow us to build a platform that doesn’t just reflect the world but actively accelerates human progress.”
In essence, Musk was transferring an asset from his left pocket to his right pocket. Both X and xAI are private firms majority controlled by Musk. Tesla CEO has a history of sea-dealing. In late 2016, Musk bought solar panel manufacturer SolarCity in a share swap for US$2.6 billion in Tesla stock. Musk was the CEO and largest shareholder of Tesla.
He also owned 20% of SolarCity, which his cousins founded. He sat on the boards of both companies. Like Tesla itself, SolarCity was laden with debts and had little visibility of profits. Wall Street analysts voiced concerns that the merger would burden Tesla with excessive debt and that Musk was using the deal to advance his personal interests at the expense of public shareholders and essentially bailing out Solar City. In 2018, when Tesla was teetering on the verge of bankruptcy, Musk announced that he was considering taking the EV pioneer private for US$420 (or split adjusted US$6,300) a share and had “funding secured” for the deal. It turned out he clearly did not.
The rise of xAI
How did xAI, an AI start-up launched in late 2023, go from zero to US$80 billion and then buy former Twitter for US$45 billion in July 2023, US$1 billion for a new AI start-up to rival OpenAI, Anthrophic and other artificial intelligence start-ups? In November 2023, xAI raised US$1 billion, of which US$134.7 million was outside funds. That assumes Musk and his friends put up the remaining US$865.3 million. In May 2024, xAI raised US$6 billion, mostly from VC firms, including Andreessen Horowitz, Lightspeed Venture Partners, Sequoia Capital and Tribe Capital.
Last November, Musk raised US$5 billion for xAI at a US$50 billion valuation from Fidelity Investment, Blackrock Inc, and VC firms Sequoia Capital. That’s US$12 billion of capital raised over 12 months at a US$50 billion valuation. Last week, its valuation suddenly increased to US$80 billion, with no new capital raised over the previous four months. Musk then used the xAI’s skyrocketing currency to do a share swap with his loss-making social media platform, X. Oh, by the way, two weeks ago, Musk also raised US$1 billion of equity for X at an equity valuation of $32 billion to pay down US$1 billion of X’s borrowing. This past week, X’s valuation has suddenly grown to $33 billion.
Before the share swap, X already owned roughly 12% of xAI, which it received in exchange for incubation costs, such as the use of its computers, engineers and GPU chips. One reason X’s equity valuation is US$33 billion is because of that 12% stake. If xAI is worth US$80 billion, X’s stake in xAI would be valued at around US$9.6 billion. Without that xAI stake, X would be worth just US$23.4 billion. Indeed, Musk had initially allotted a 25% stake in xAI to X, but that was diluted after xAI raised additional money.
Musk has dismissed media reports that he was giving up his role as a key player in the Trump administration as “fake news”. The President himself told reporters a few weeks ago that “at some point Elon’s going to want to go back to his company.” Trump said: “I’d keep him as long as I could keep him.” Trump has repeatedly defended the world’s richest man describing him as “a patriot” and “a friend of mine” and noting that Musk has “been through a lot,” mentioning death threats and the spate of vandalism directed at Tesla cars and other facilities.
Musk may not be running DOGE or attending cabinet meetings much longer, but the fact is that he is not going away. He will remain a player as long as Trump wants him. Musk recently declared that his original Washington mission to slash waste was mostly accomplished: “I think we will have accomplished the work required to reduce the deficit by US$1 trillion.”
Assif Shameen is a technology and business writer based in North America
