Tesla boss Elon Musk bet on Donald Trump and won. It’s not just the electric car manufacturer’s share price that’s jumping for joy. Bitcoin and stocks like Coinbase are also doing fantastically. But how long will these Trump bets work?
Elon Musk is not satisfied with a few million. His electric car manufacturer Tesla has gained a few hundred billion US dollars in market value since Donald Trump’s election victory in the USA – even breaking the trillion dollar mark. Tesla is not far from its record high. On November 6, when it was clear that he had won the race for the presidency, market participants with a focus on stocks and tech cheered.
As the American benchmark index S&P 500 – which includes the largest US companies – continued to reach new record highs, the champagne corks popped. “Trump promises less bureaucracy, lower corporate taxes and the insulation of the domestic economy from foreign competition through higher tariffs,” says Klaus Schulz. Germany head of LYNX, an online broker with a focus on US stocks.
cryptocurrencies
US technology stocks were particularly euphoric after Trump’s election victory. “The industry could benefit from possible relaxed regulation,” said Schulz. The crypto market also exploded. Bitcoin shot up 40 percent, hitting the $100,000 mark for the first time. No wonder: The Trump team is considered crypto-friendly.
The cryptocurrency Ethereum developed similarly, increasing by a good 45 percent. The shares of the US company Coinbase, which operates a trading platform for cryptocurrencies. Shot up by almost 60 percent in the three weeks after the presidential election and are now among the frequently traded underlying assets at brokers such as LYNX from Berlin or the Munich Stock Exchange.
Now both Bitcoin and other stocks dependent on it have been massively overbought for days. In view of the exorbitantly increased prices, the question arises whether a correction will come. And if so, how dramatically will the prices collapse? “With Bitcoin, the fact that round marks such as 1,000, 10,000 or now 100,000 dollars are an additional factor in inviting profit-taking,” says Walter. This would not be uncommon after such overbought markets. Investors got a taste of this situation at the beginning of August when the major stock indices lost several percentage points in one day, but this correction was not sustainable.
tech stocks
Tech stocks such as Microstrategy, Tesla and Palantir currently appear to be particularly at risk. Microstrategy, the company that has invested billions in Bitcoin, is profiting from the wave of crypto euphoria . But as soon as Bitcoin comes under pressure, Microstrategy will also suffer. Investors can hedge against price losses in t hose stocks by shorting the derivatives issuers or simply speculate on falling prices. Microstrategy now has Bitcoin worth around 30 billion dollars on its books and this figure would collapse if the crypto euphoria fades.
Tesla
Then there is Tesla, the flagship of the electric vehicle industry. For Joseph Spak, an analyst at UBS, it is clear that the Tesla rally has little to do with fundamental data. Elon Musk, who likes to portray himself as a friend of Trump, has benefited from the higher tariffs on Chinese imports.
But behind Tesla’s shiny share prices, the world does not look quite so rosy:
The company is struggling with declining market shares in the USA, China and Europe. The dream of Tesla as a pioneer of e-mobility is in danger of fading. In any case, the valuation of the Americans can only be justified if you see Tesla not as a car manufacturer, but as a tech group with an associated e-car business.
Palantir
Another company is known primarily for being politically controversial and having an extroverted boss in Alex Karp. The shares of the secret software darling Palantir have also literally gone through the roof after Trump’s election victory. And have been cheered up from 20 to 65 dollars since June 2024. The company is worth 150 billion dollars, although its sales are still low compared to the market value. The hope of profiting from tax cuts and lucrative government contracts is driving up prices. “But the high dependence on government contracts could also prove to be a boomerang in the future if the high expectations are disappointed,” believes Vanyo Walter.
For all Trump bets shown, momentum and expectation management must be carefully considered. Trump’s inauguration will be on January 20. Immediately after that, the cards will be on the table and it would not be surprising if some Trump bets backfired, at least in part.