Finance

Tesla Stock Has Surged, But The Risk Is Great That Trump Will Alienate Musk Before Real Graft Can Commence

A greasy form of chemistry still exists between the two.

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Elon Musk The 2022 Met Gala Celebrating “In America: An Anthology of Fashion” – Arrivals

(Photo by Dimitrios Kambouris/Getty Images for The Met Museum/Vogue)

For the average investor, buying individual stocks is more or less a form of gambling. That being said, about eight years ago I was happy to gamble on a few shares of Tesla.

It was a different time for Tesla. Elon Musk was CEO, but he was ages away from his hard rightward turn, his purchase of Twitter, and all his latest personal dramas. Car production was ramping up, though the company was far from maturation. There were many ups and downs.

It has been a wild few years for Tesla. I still own those shares, and despite the bumpy ride, overall they have soared.

A healthy portion of the gains came in just the past few weeks. The Tesla share price has benefited immensely from Donald Trump’s election to the presidency. Musk poured close to $200 million into Trump’s election war chest. He also offered a vast, albeit immeasurable, in-kind contribution by purchasing Twitter and then weaponizing the social media platform throughout its rightward slide into X. In return, Musk was promised an important role in the new administration.

Now that Musk is co-leading what Trump is calling the Department of Government Efficiency (which is not a real government department), investors seem bullish on emerging opportunities that can further increase Musk’s wealth (much of which is held in Tesla shares). What form such subsidization might take when it comes to Tesla is unclear at this point, but Trump has proven willing to aim the money spout of massive government graft in the direction of his friends in the past.

However, Tesla investors, myself included, best take heed of one of Trump’s most obvious and consistent character traits: he almost always alienates, offends, and discards his closest associates and allies.

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According to an analysis by the Brookings Institution, the rate of turnover among senior level advisors to Trump during his first term reached 92%. The amount of turnover within Trump’s cabinet and in other high-level federal government positions far outpaced the turnover rates of any of the five presidents who preceded him.

As we saw in the most recent election cycle, many of these displaced officials didn’t just slink away into the night. Some of the people who had been closest to Trump, from his former chief of staff to his former press secretary, became his most vocal critics.

Also worth remembering is that Musk and Trump have had friction before. Back in 2017, Musk joined Trump’s economic advisory council, only to resign a few months later after Trump announced he was pulling the United States out of the Paris climate accord. Hard to believe that that was the same Musk who now fawns over Trump like he is in love, but it happened.

Signs of tension in the Musk-Trump 2.0 relationship are already present. Apparently Musk doesn’t play so nice with some of the lesser MAGA toadies. Trump has reportedly joked several times (out of earshot of Musk) about the tech billionaire’s ubiquitous presence at Mar-a-Lago. “Elon won’t go home,” said Trump to a meeting of House Republicans. “I can’t get rid of him, at least until I don’t like him.”

Yet, there remains a greasy form of chemistry between the two. “I’m for electric cars, I have to be because Elon endorsed me very strongly,” Trump told a Georgia crowd before the election. Quite a flip-flop from a man who’d previously said supporters of electric vehicles should “rot in hell.”

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At the close of trading on December 2, Tesla stock was up by about 40% since Election Day, with many analysts predicting further gains in the near future. As long as this dystopian buddy comedy continues, I’d tend to agree with the Tesla bulls.

That cautious optimism comes with a huge caveat. Nobody burns through confidants like Trump, and now that the election is over, Musk needs Trump more than Trump needs Musk. In the coming months, we shall see if Musk is equipped to solve what could be described as the ultimate engineering challenge: figuring out how to get along with Donald Trump.

Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at [email protected].

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