Tesla Stock Extends Rally: Musk-Trump Alliance Fuels Gains

Tesla's stock has been on a tear, surging on optimism surrounding Elon Musk's alliance with Donald Trump. Following Trump's election victory, Tesla shares jumped 11.8%, pushing the company's market capitalization above $1 trillion. This article explores the factors driving Tesla's rally and assesses the potential implications for the company's future.

The Musk-Trump alliance has fueled investor enthusiasm, with analysts like Dan Ives (Wedbush) seeing a "huge positive" for Tesla. Ives believes that Trump's presidency could add $40-$50 per share to Tesla's stock price, citing the company's scale and potential competitive advantage in a non-EV subsidy environment. Higher China tariffs under Trump could also hinder cheaper Chinese EV players, benefiting Tesla (CNBc, 2024).

However, the benefits of a Trump win for Tesla are not yet clear, and the stock's valuation remains high. Tesla's profits are estimated to drop by 23% this year, and its valuation stands at 102 times forward earnings, despite its strong performance in energy storage and generation. Investors should exercise caution, as the rally may be driven more by optimism and less by fundamentals.



Tesla's competitive landscape may shift under a Trump presidency, with potential higher China tariffs hindering cheaper Chinese EV players like BYD and Nio. This dynamic could give Tesla a clear competitive advantage in a non-EV subsidy environment. However, Trump's skepticism of electric vehicles and potential elimination of EV purchase credits could negatively impact Tesla's U.S. vehicle sales (Fortune, 2024).

Musk's role in a Trump administration could also influence his ability to lead Tesla and drive innovation. As a cabinet member, Musk would face conflicts of interest and time constraints, potentially distracting from Tesla's operations. However, Musk's influence on Trump could benefit Tesla through lighter EV regulations and higher China tariffs, giving it a competitive edge.



In conclusion, Tesla's stock rally, driven by the Musk-Trump alliance, raises questions about the potential impact of regulatory changes on the company's long-term growth. While analysts see lighter EV regulation under Trump as a positive for Tesla, the ultimate impact on the company's growth prospects remains uncertain. Investors should monitor these developments and be prepared for potential profit-taking, given the company's high valuation and the potential for market volatility.

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