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Highlights
- Hedge funds shorting Tesla incurred losses after Trump’s election win.
- Elon Musk’s support for Trump boosted Tesla’s market, exceeding $1 trillion in value.
- EV sector faces challenges under Trump’s policies, while Tesla’s stock thrives.
Tesla’s recent performance has created a notable shift in the investment landscape, with hedge funds bearing substantial losses after shorting the stock. Since the U.S. election, Tesla’s stock has risen by more than 30%, adding approximately $200 billion to its market value and placing the company's valuation over $1 trillion. This surge has led to an estimated $7 billion in on-paper losses for hedge funds holding short positions.
This trend gained momentum with Elon Musk’s endorsement of President-elect Trump. Musk, a leading supporter of Trump, is now positioned to potentially gain significant political influence. His endorsement and financial backing of Trump’s campaign have strengthened his ties with the administration, with Musk expressing interest in roles that could help reduce regulatory hurdles for the auto industry. Such political ties have amplified Tesla's market position, making it a challenging stock for hedge funds to bet against.
Per Lekander, CEO of Clean Energy Transition, noted his small short position in Tesla before the election, a position he later reduced. Despite minimizing losses, he acknowledged the financial hit. Tesla’s ascent has underscored the risks associated with shorting its stock. For many hedge funds, betting against Tesla has proven costly, particularly as the stock continues to rally despite broader challenges in the electric vehicle (EV) sector, including trade tensions, low consumer demand, and increasing competition.
Data from Hazeltree, tracking the investment activity of over 500 hedge funds, showed a shift in positions, with fewer funds maintaining short positions against Tesla. In early July, nearly 17% of hedge funds had shorted Tesla. However, by early November, this figure had dropped to 7%, as the stock’s upward trajectory prompted many to alter their strategies.
While Tesla’s growth has contrasted sharply with the broader EV market, which has seen a year-to-date decline of more than 12%, Musk’s support for Trump has likely contributed to Tesla’s performance. Nevertheless, some analysts, including Lekander, predict that the Trump administration’s policies on climate and renewable energy may eventually impact Tesla’s growth. Trump’s promises to cut clean-energy incentives have led to declines in renewable stocks, affecting segments from solar to wind.
Musk’s proximity to Trump could allow Tesla more influence in policy areas critical to the automotive sector. In recent statements, Musk indicated his intent to push for streamlined approval processes for autonomous vehicles, a move that could further bolster Tesla’s position in the U.S.
