Hedge funds with short positions against Tesla incurred losses of at least $5.2 billion between election day and the following Friday, according to Bloomberg calculations based on data from S3 Partners.
This group has dwindled, as many funds exited their short bets in the past four months, coinciding with CEO Elon Musk's endorsement of Trump on July 13.
Musk has emerged as a significant supporter of Trump, using his wealth to contribute substantially to Trump's 2024 campaign. His alignment with the president-elect positions him for potential political influence, as Trump has indicated intentions to reward loyal supporters.
Since the November 5 elections, Tesla shares have risen nearly 30%, adding over $200 billion in market value. By Friday, the company's valuation surpassed $1 trillion. In light of this, hedge funds that had shorted the stock are now shifting strategies.
As of November 6, only 7% of hedge funds held short positions in Tesla, down from 17% in early July, according to Hazeltree data. Conversely, only 8% maintained net long positions in the stock.
Tesla has proven to be a risky short sell, even as the broader electric vehicle industry contends with challenges such as trade tensions and increasing competition. In July, nearly 20% of hedge funds tracked by Hazeltree had bet against Tesla but faced losses after the company reported strong sales figures.
In contrast, the electric vehicle sector has declined over 12% this year, as indicated by the KraneShares Electric Vehicles and Future Mobility Index. Tesla, however, has gained approximately 30% in 2024, more than doubling its value last year.
Meanwhile, renewable energy stocks have plummeted following Trump's election victory, raising concerns about potential cuts to clean energy incentives.
Analysts predict that Tesla may also feel the repercussions of Trump’s anti-climate policies within 12 to 18 months. Despite Musk's ties to the president-elect, some experts believe Trump's victory could negatively impact Tesla as an automotive company.
Musk has expressed interest in a government role to streamline regulations, particularly for autonomous vehicle approvals. Trump has entertained the idea of appointing Musk as a “cost-cutting secretary.”
Edward Lees from BNP Paribas Asset Management noted Musk's influence could serve as a bridge between the tech community and Washington.