After initially tiptoeing around an endorsement, Elon Musk eventually dove head first into backing Donald Trump’s presidential election campaign. He spent more than $130 million on Trump’s election and in supporting Republicans in various congressional races.
As one of the most high-profile supporters of Trump’s candidacy, Musk had a lot to lose if he ended up on the wrong side of the Electoral College. He told podcaster Joe Rogan he believed he would suffer significant retribution from his adversaries in Congress if Trump lost.
Fortunately for him, that didn’t happen as Trump also won the popular vote. And his support is already paying off.
24/7 Wall St. Insights:
- Elon Musk was the most visible billionaire backing Donald Trump’s candidacy for president and he invested $130 million of his own money to support the campaign.
- With Trump’s decisive victory, that big bet is paying off for Tesla (TSLA) in particular, as new rules on EV companies could eliminate a lot of the company’s competition.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
Jumpstarting the EV maker’s engine
Shares of Tesla (NASDAQ:TSLA) are up nearly 13% in morning trading as investors believe Musk’s close association with Trump will boost the electric vehicle maker’s position.
While Trump has proposed eliminating the $7,500 tax credit on EV purchases, Tesla already lost the credit on several models, such as its Model 3 and the Cybertruck. The Treasury Dept. had imposed new rules on battery sourcing, which caused the number of vehicles in the industry that qualified for the credit to drop from 43 to 19, according to Reuters.
Yet as Tesla is the only EV maker that is profitable, the further reduction of tax credits would hit other EV makers harder. Indeed, Musk posted on X earlier this summer, “Take away the subsidies. It will only help Tesla.”
Rivian (NASDAQ:RIVN) was falling 9% heading into noontime trading, Lucid Motor (NASDAQ:LCID) was down 3%, and Chinese EV manufacturers Nio (NYSE:NIO) and Xpeng (NYSE:XPEV) were both off 5.5%. Trump has proposed tariffs of 10% on foreign-made goods while those from China could face tariffs as high as 60%.
Tesla recently lost its title of biggest EV maker to China’s BYD (OTC:BYDDY), but higher tariffs would likely keep cheap foreign EVs out of the U.S. market.
Musk views the industry subsidies as a sop to legacy automakers trying to break into the EV market. Getting rid of the credits, as well as the government support by way of loans to make EVs and batteries in the U.S., could limit the competition Tesla faces.
Ford (NYSE:F) and General Motors (NYSE:GM) are already dramatically scaling back their EV investments as demand for them has dried up.
Constellation of companies rising stars
Cryptocurrencies were higher in the morning, with Bitcoin (CRYPTO:BTC) up 7% and Dogecoin (CRYPTO:DOGE) racing up 13%. Musk, of course, has been a big backer of Dogecoin. Trump has tasked Musk with reining in government costs and bureaucracy. He will create a new Department of Government Efficiency (DOGE) in a bid to trim $2 trillion from the federal budget.
Musk’s SpaceX should also benefit from his support of Trump. There were calls for the government to cut off the private space company from further government contracts if Vice President Kamala Harris won the election. But with Trump’s victory, SpaceX may see even more business come its way.
With Tesla stock trading over $283 a share today, it is at its highest level in more than a year. TSLA shares, though, are still 31% below their November 2021 all-time high of $410 per share.
Trump’s win could be the beginning of a new march higher for the stock. Considering Musk owns over 400 million shares, today’s gain alone make for a good return on investment in the campaign.
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