Tesla stock surges as Musk-Trump alliance sparks investor optimism

Tesla shares rose more than 8 percent on Monday, continuing a strong rally that followed the electric car maker's share price climbing nearly 40 percent last week as investors bet on the close relationship between president-elect Donald Trump and Elon Musk. If gains continue, Tesla's stock will rise to USD 348.30, bumping the company's value up to nearly USD 87 billion. Tesla's market capitalisation moved past USD 1 trillion for the first time in two years Friday as a stock rally pushed on by Trump victory news drove the Wall Street automaker up nearly 28 percent since last Wednesday.

Tesla’s year to date worked out to a tepid 1% gain, a far cry from current air force one levels, until before recently that is. Musk’s longtime support of Trump, meanwhile, could mean strategic advantages for Tesla as federal policy may shift into favor, analysts say. In public, Musk has back Trump and according to federal records, has contributed at least USD 119 million to pro Trump initiatives.

Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, said that 'As an 'efficiency czar,' Musk could view this administration as an opportunity to simplify regulatory processes'. Such deregulation efforts could help the Tesla, as could Musk’s other ventures, if it includes less eyes on where Tesla’s autonomous driving technology sits, a focus for the automaker as it shifts gears toward self-driving and robotaxis.

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Musk’s companies depend on regulatory approvals and government subsidies, as well as good policies. When it comes to Musk’s reported influence, there are Tesla’s electric vehicles, but also ventures like SpaceX, Starlink and Neuralink. Musk, routinely referred to as a proponent of Trump because of his disputes with those he, for his own reasons, believes to be working against beneficial fossil fuel development, gets added points for joining the Trump administration's proposed government efficiency commission, which will help bolster expectations of regulatory rollbacks.

Musk’s influence could land on the hook legally, with potential accusations of preferential treatment, but analysts say such cases could take years to make it to court — allowing Musk’s businesses plenty of time to reap any policy benefits.

While Trump has signaled a rollback on some electric vehicle incentives established by the Biden administration, Tesla’s strong market presence may insulate it from these cuts. Analysts suggest that newer startups could bear the brunt of the impact, while Tesla stands to strengthen its market leadership amidst shifting U.S. policies.