Investors Place High-Stakes Bet on Musk and Tesla Under Trump

Tesla's stock has surged since the presidential election, gaining nearly half a trillion dollars in market value. Even after a weak financial report, investors remain confident that Donald Trump’s policies will benefit Tesla more than they will harm it.

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Optimism Around Deregulation and Business Growth

With Trump pushing to roll back regulations and adjust trade policies, investors believe Tesla stands to gain. “This is a game-changer for Tesla and Musk,” said Dan Ives, an analyst at Wedbush Securities. He noted that Musk appeared highly confident during the latest investor call.

Musk has repeatedly defied expectations, transforming Tesla into the most valuable automaker while becoming the world’s richest individual. His latest plans include deploying Tesla robots and launching self-driving taxis, potentially as early as June in Austin, Texas.

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How Trump’s Policies Could Shape Tesla’s Future

The Trump administration is expected to have a major impact on Tesla. Transportation Secretary Sean Duffy has pledged to simplify federal rules on self-driving technology, replacing the inconsistent state regulations Musk has criticized. Additionally, Trump has eased his stance on China, opting for a 10% tariff instead of the 60% he had initially threatened. Since China is a key market for Tesla, this decision could work in the company’s favor.

However, some of Trump’s policies could hurt Tesla. A 25% tariff on imports from Canada and Mexico may increase Tesla’s production costs. In addition, Trump plans to eliminate the $7,500 federal tax credit for electric vehicles and loosen emissions regulations—moves that could weaken Tesla’s ability to profit from selling regulatory credits. Tesla made $692 million from these credits in the last quarter of 2024, a 60% increase from the previous year.

Regulatory Scrutiny and Financial Challenges

Tesla continues to face regulatory challenges. The National Highway Traffic Safety Administration (NHTSA) is investigating Tesla’s Full Self-Driving (FSD) technology after multiple accidents in low-visibility conditions. While Duffy has assured lawmakers that investigations will remain independent, it remains unclear how Tesla will handle regulatory hurdles.

Tesla’s financial performance has also raised concerns. The company reported its first decline in sales in over a decade as competition from BMW, Volkswagen, and China’s BYD increases. Despite missing revenue and profit expectations, Tesla’s stock continues to rise, puzzling analysts.

Musk’s Political Stances Stir Controversy

Musk’s political statements are drawing attention. In Europe, a key market for Tesla, he has voiced support for far-right groups and criticized UK Prime Minister Keir Starmer. His remarks have sparked backlash, with protests outside Tesla’s Berlin factory and demonstrations in Milan where activists compared him to historical figures.

Such controversies could harm Tesla’s reputation and affect its regulatory approvals in Europe, particularly regarding self-driving technology. “How many Tesla buyers share Musk’s views?” asked Felipe Munoz, an analyst at Jato Dynamics. “Risking consumer trust is not a smart business move.”

Tesla’s Market Value and Future Prospects

Despite risks, Tesla’s market value has soared to $1.3 trillion, surpassing automakers like General Motors, BMW, and Ford combined. Musk insists the company is still undervalued, envisioning Tesla as the world’s most valuable firm, surpassing Microsoft, Apple, and Nvidia.

Wedbush’s Ives believes Musk’s alignment with Trump is a defining moment. “Musk’s bet on Trump is monumental,” he said. “Deregulation could be worth trillions—but whether Tesla can maintain this momentum remains uncertain.”

Also Read: Tesla Investors Hope Cheaper EV Model Boosts Growth in 2025