Investors are betting that Musk and Tesla will make a fortune under a Trump presidency!
For Elon Musk fans, it’s a half-trillion-dollar bet. That’s how much Tesla’s stock market value has risen since the presidential election, a dizzying and uninterrupted rise in recent days despite a disappointing financial report that would have sent shares of almost any other company plunging. Investors are betting that President Donald Trump will help Musk’s company more than hurt it with his plans to take an axe to Washington’s regulations and impose tariffs to get his way with major trading partners. “It’s going to be a golden age for Tesla and Musk,” said Wedbush Securities financial analyst Dan Ives.
Investing in Tesla has long been a gamble. The odds were stacked against Musk building a successful electric car company, but he has no problem growing it to become the world’s most valuable carmaker — and in the process, the world’s richest man. But this latest gamble seems particularly risky. Musk says the company’s real value lies in a future of Tesla robots, thousands of them perhaps by the end of the year, and in autonomous, driverless vehicles. He promised at Tesla’s conference to start offering such robo-taxis in June in Austin, Texas, and across the country by the end of next year.
The catalyst for all of this will be Trump, or so the story goes, who has given Musk an office in the White House and made him head of the new Department of Government Efficiency, tasked with shrinking the size of government. Trump’s new transportation secretary, who could have a big impact on Tesla, is mostly sticking to the script. Sean Duffy has promised to cut back on excessive regulations for automakers, as well as come up with a single set of federal rules for self-driving technology to replace a series of state-by-state rules that Musk has criticized for hindering development.
Perhaps most importantly, Trump has softened his stance on China, a major market for Tesla, hitting the country with an additional 10% tariff starting Saturday, rather than the 60% he threatened during the campaign. Still, Trump’s decision to impose tariffs on Canada and Mexico, as well as China, should affect Tesla. Chief Financial Officer Vaibhav Taneja said last week that the company should feel an impact on its business because it gets parts from all over the world. Tesla sources many of its parts from abroad, so Trump’s decision to impose 25% tariffs on Canada and Mexico will hit the company hard if they stand.
Trump has also vowed to eliminate a federal tax credit designed to encourage people to buy electric vehicles. He would also lower emissions standards, a potential blow to Tesla’s business of selling “regulatory credits” to automakers that pollute more and fail to meet requirements. Tesla sold $692 million of those credits in the last three months of 2024, a 60% increase from a year earlier, revenue that almost all flows directly to Tesla’s bottom line.
It is also unclear whether the Trump administration will halt investigations into Tesla, particularly a technology the company calls Full Self-Driving, a misnomer because the vehicles can require human intervention at any time. In October, the Department of Transportation’s auto safety regulator, the National Highway Traffic Safety Administration, launched the latest of several probes into the technology after receiving reports of crashes in low-visibility conditions, including one that killed a pedestrian.
Transportation Secretary Duffy promised senators at a hearing earlier this month that he would allow the Tesla investigation to follow the facts, especially by pledging to reduce any political pressure to ease up on the president’s self-described “first mate.” Musk will need all the regulatory relief and other favors from Trump he can get. In early January, Tesla said sales would decline in 2024, for the first time in more than a dozen years, as rivals like BMW, Volkswagen and China’s BYD come out with competing EVs and steal market share.
Then, on Wednesday, Tesla reported revenue, profits and other key measures of financial health for the final quarter of 2024, all of which fell short of what analysts had expected. The stock still climbed higher. “The things that would hurt other automakers,” marvels Morningstar analyst Seth Goldstein, “don’t seem to be affecting Tesla.”
Beyond business, Tesla shareholders must always keep an eye on the CEO himself. More recently, that has meant weighing Musk's foray into politics. In Europe, a major market for his cars, Musk has supported the far-right Alternative for Germany party and called British Prime Minister Keir Starmer an "evil tyrant" who runs a "tyrannical police state."
On inauguration day in the US, Musk made a gesture towards his arm during a speech that many interpreted as a Nazi salute. He scoffed at the criticism, but the backlash was nonetheless fierce. In Germany, an image of Musk making the salute was projected onto his massive Tesla factory outside Berlin in protest. In Italy, a group of young communists hung an upside-down effigy of Musk in the same square in Milan where fascist dictator Benito Mussolini was also tied upside down.
“How many of these Tesla buyers agree with Musk?” said Felipe Munoz, a senior analyst at automotive researcher Jato Dynamics. “I don’t see the point in alienating potential customers.” Musk also risks upsetting regulators in Europe, who he hopes will soon approve the use of “Full Self-Driving” there. If investors start to lose faith in Musk, it’s a long way off.
Tesla's stock price surge since the election alone is more than the annual economic output of 160 countries. Tesla's total market value has risen to about $1.3 trillion, more than the value of General Motors, BMW, Ford, Ferrari, Porsche and a dozen other top automakers combined. Musk thinks that, if anything, the stock should be higher.
“I see a path for Tesla to be the most valuable company in the world by far, not even close,” he said Wednesday, before doubling down on that statement. “There’s a path where Tesla is worth more than the next five companies combined.” That would mean surpassing Microsoft, Apple and Nvidia. Tesla is currently the seventh-most valuable company in the S&P 500. Wedbush’s Ives, the “golden age” analyst, acknowledges that the stock can only go up from here. “The bet for the ages that Musk made was on Trump,” he said. “Musk is going to have a massive impact on deregulation in the next generation, and that’s worth a trillion dollars.”
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