Despite recent gains, Tesla’s stock has underperformed compared to broader market indices this year.
Tesla’s stock spiked in early trading yesterday, soaring 12%, hoping a Donald Trump election win could benefit CEO Elon Musk, Tesla’s largest shareholder and a major Trump backer.
Musk’s Support for Trump Yields Potential Advantage
According to a report by CNBC, throughout the campaign, Elon Musk supported Trump, even making significant financial contributions. Musk’s backing now appears to align with Trump’s promises to support key business allies in his administration.
Investors seem optimistic about potential policies under Trump that could favor Musk’s ventures, despite the former president’s generally tepid stance on clean energy.
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Market Reaction and Tesla’s Performance
On Tuesday, Tesla shares advanced 3.5% during regular trading hours, ending a six-day losing streak. Despite recent gains, Tesla’s stock has underperformed compared to broader market indices this year. While the S&P 500 rose 21.2% year-to-date, Tesla posted only a 1.2% increase as of Tuesday’s close.
Potential Role of Musk in Trump’s Administration
During a campaign rally at Madison Square Garden, Trump announced plans to appoint Musk to lead a proposed government efficiency commission if elected. Musk echoed Trump’s commitment to cutting wasteful government spending, stating he could help reduce the federal budget by $2 trillion. “We’re going to get the government off your back and out of your pocketbook,” Musk told supporters at the rally.
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Musk’s $75 Million Contribution to Pro-Trump PAC
Last month, Musk contributed nearly $75 million to America PAC, a super political action committee he created to support Trump’s candidacy. With Trump now elected, Musk’s contributions and close association with the president-elect could shape his role in policy-making, particularly in areas impacting Tesla and his other businesses.
Tesla’s Complex Position as a Clean Energy Stock
While Trump’s policies have traditionally been unsupportive of clean energy, Musk’s unique position as both a major Republican donor and head of a clean energy company like Tesla presents a new dynamic. Investors seem hopeful that Musk’s influence could drive policies that benefit Tesla, despite Trump’s previous stance on energy initiatives.
