Tesla shares jumped nearly 3% in premarket trading on Wednesday, while Direxion Daily TSLA Bull 2X Shares ETF rallied 5.3%.
Destiny Tech100 Inc ETF rocketed 15% in premarket trading on Wednesday as SpaceX is its largest holding.
President-elect Trump announced late Tuesday that Tesla CEO Elon Musk and Vivek Ramaswamy will lead the Department of Government Efficiency, or DOGE. (The name is also a reference to Dogecoin , a cryptocurrency talked about by Musk in the past.)
“Together, these two wonderful Americans will pave the way for my administration to dismantle government bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure Federal agencies,” reads part of the notice from Trump.
Investors knew it could happen. Now it has happened.
Issues of management distraction pop up from time to time for Tesla investors. Tesla stock performed poorly while Musk was buying his social media platform X. Questions about Musk’s level of engagement surfaced again early in 2024 after a judge voided his 2018 pay package close to the time Musk was creating his AI company xAI.
This is another one of those. The fact that Ramaswamy is involved as well could be a positive for Tesla investors. Musk is sharing the load. What’s more, fewer regulations also have the potential to benefit Tesla and SpaceX operations, according to Wall Street analysts.
Tesla didn’t immediately respond to a request for comment about Musk’s time commitment.
“Since this is not an official Cabinet or U.S. government position and it’s essentially newly created, there will be NO changes to Musk’s CEO roles with Tesla and SpaceX,” wrote Wedbush analyst Dan Ives in a Tuesday. “This is another indicator that Musk will have a major seat at the table in the White House and ultimately this is a positive for Tesla as Trump will fast-track the autonomous and AI initiatives in our view over the next 12 to 18 months.”
Ives rates Tesla stock Buy and has a $400 price target.
Ives is positive, but there will likely be headwinds. “There are many obvious conflicts with most of Musk’s numerous business ventures,” says Carl Tobias, Williams Chair in Law at the University of Richmond. DOGE might work with “established federal entities with rules and bureaucracies that are anathema to Musk and with whom he is constantly in conflict and litigation.”
Shares of the electric-vehicle maker closed at $328.64, down 6.1%, on Tuesday.
Coming into Tuesday trading, Tesla stock had risen for five consecutive days, gaining about $107 a share, or 44%, over that span. The company’s market value rose by $344 billion.
Comments