Tesla CEO Elon Musk advises the United States to withdraw from the North Atlantic Treaty Organization or NATO.
This is another politically divided problem he encountered, giving investors another thing that could affect the stock of its electric car manufacturer.
“We really should,” Musk responded to a tweet about an article about the U.S. withdrawal from NATO. “It doesn’t make sense for the United States to pay the price for Europe.”
NATO was founded in 1949 by the United States, Canada and several Western European countries to provide collective security to the former Soviet Union. Part of the NATO website wrote that the alliance’s secondary objectives include halting the revival of “European nationalist militarism” through a powerful presence on the North American continent, encouraging political integration in Europe.
NATO’s annual budget is currently about $5 billion. The U.S. pays less than $800 million or the Department of Defense spends over eight hours.
NATO’s budget issues are not as good as overall military spending. NATO countries should spend about 2% of GDP on defense. According to NATO data, NATO countries are below the 2% threshold most of the time, reaching 2% in 2024.
The United States spends nearly $1 trillion on defense every year, close to 3% of GDP. According to Goldman Sachs, spending in the euro zone is close to $300 billion, accounting for almost 2% of GDP.
Investors have no choice but to refresh NATO. Musk’s activity in Washington has become a risk factor for its electric car maker’s stock. Tesla’s sales in Europe and the United States are weak this year, leading to the idea that Musk is alienating his core buyers: politically left-leaning car buyers want green. Historically, American Democrats are more likely to buy electric cars than Republicans.
“My wife insists that we sell Tesla…it’s the best car I have,” said Arjun Devecha, director and head of emerging market equity at GMO. “If you live in Berkeley, California, you won’t be burdened with Tesla anymore.
Tesla shares have begun trading since the inauguration on January 20, with Tesla shares down about 38%, bringing the stock’s final closing price to about $480 in history in mid-December.
Wedbush analyst Dan Ives wrote on Thursday that investors will have to consider issues related to Musk. He ratings the stock purchase at $550, and the target price of Tesla shares is $550.
Ives is mainly discussing Musk’s efforts to curb government waste in the newly formed ministry of government efficiency. Now, investors must also worry about Doge and Nato.
The uncertainty over the U.S. commitment to European defense is not just Tesla stock in 2025.
According to FACTSET, the market value of the largest defense contractors in the United States, Lockheed Martin, L3 Harris Technologies and Northrop Grumman, has dropped by about $37 billion since the November 5 presidential election. The value of the BAE system in the UK, Rheinmetallurgical in Germany, Leonardo in Italy and Thales in France increased by about $70 billion.
Write to Al root at allen.root@dowjones.com
