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Tesla's Trillion-Dollar Triumph: Hedge Funds Reel as Trump Ties Boost Stock Surge

AInvestSunday, Nov 10, 2024 8:00 pm ET
1min read

Since Donald Trump won the U.S. presidential election, hedge funds maintaining short positions against Tesla have faced substantial financial setbacks. According to data compiled by S3 Partners, these funds have incurred at least $5.2 billion in losses from the election day up to the recent close of last Friday.

The upswing in Tesla's stock price, including a notable surge of over 8% last Friday, has driven the electric vehicle giant's market capitalization above $1 trillion once again. This marks a significant increase of approximately 29% for the week, fueled by investor sentiment anticipating potential benefits for Tesla if Trump were to return to the White House. Elon Musk, Tesla's CEO, a prominent supporter of Trump, has contributed at least $130 million to support Trump's electoral campaigns, heightening expectations of regulatory advantages should Trump resume leadership.

Despite the stock's moderate performance earlier in the year, with only about a 1% rise, recent developments have propelled Tesla's year-to-date gains to approximately 30%. This aligns Tesla with other technology behemoths in the trillion-dollar club, albeit Microsoft, Apple, and Alphabet surpassing the $2 trillion mark.

Analysts, such as Dan Ives from Wedbush Securities, speculate that a Trump presidency might likely reduce regulatory constraints for Tesla and similar companies. Ives highlighted Tesla’s unparalleled scale in the electric vehicle industry, suggesting it would provide the company with a competitive edge in an environment devoid of electric vehicle subsidies. He also mentioned the potential for higher Chinese tariffs, which could limit U.S. market penetration by Chinese electric vehicle manufacturers like BYD and NIO.

Historically, Tesla's sales growth has been partially fueled by federal electric vehicle tax credits, which Trump has previously indicated he might cut. In conjunction with evolving market dynamics, Tesla aims to capitalize further, although its challenges include competition in autonomous vehicle technology.

Musk recently expressed during Tesla's earnings call that the company aims for 20% to 30% growth in vehicle deliveries next year, driven by lower-cost car offerings and advances in autonomous driving. This ambition underscores ongoing challenges from competitors such as Waymo, under Alphabet, which has established commercial autonomous taxi services in major cities.

Musk also noted the need for a federal approval process for autonomous vehicles, proposing to leverage potential Trump administration ties to navigate and consolidate currently fragmented state-by-state regulations. Tesla’s strategic maneuvering amid these developments could decisively impact its long-term market positioning.

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.