Hedge Funds Lose Over $5 Billion Betting Against Tesla Amid Musk-Trump Alliance

Hedge funds betting against Tesla Inc. have lost at least $5.2 billion since the 2024 U.S. election. Tesla’s stock soared as CEO Elon Musk's alliance with President-elect Trump gained attention, causing many funds to reverse positions. As Tesla's stock jumps 30%, short positions continue to shrink.

Elon Musk’s Growing Support for Trump: The Wealthiest Person’s Political Influence and Impact on Tesla’s Stock

According to Bloomberg calculations based on data provided by S3 Partners, hedge funds that had short positions against Tesla between election day and Friday's closing, she suffered an on-paper damage of at least $5.2 billion.

According to secondary data given by Hazeltree, which tracks the positions of over 500 hedge funds, they were one of a shrinking group caught off guard as many of their peers liquidated bets against Tesla over the past four months. Musk's support of Trump on July 13 corresponded with that shift in stance.

Tesla CEO Elon Musk has become Trump's most enormous admirer among billionaires. Musk is one of the largest donors to the 2024 race since he has fueled Trump's campaign with his wealth as the wealthiest person in the world. Since Trump has made it apparent that he intends to reward loyalists, Musk's decision to align with the president-elect now positions him for a position of political influence.

Per Lekander, CEO of hedge fund manager Clean Energy Transition said he had " a short in Tesla heading into the election." His losses were "pretty small" because he had been able to reduce the position "quite a lot."

“But we have lost some money,” he said.

Tesla Surges 30% Post-Election, Forcing Hedge Funds to Rethink Short Bets Amid Industry Struggles

Tesla's stock has increased by about 30% since the election on November 5, adding well over $200 billion to its market capitalization. In light of this, hedge funds that had previously placed short bets against the business have since hurried to change their minds.

Weekly data from Hazeltree shows that as of November 6, just 7% of hedge funds were net short Tesla, compared to 17% in early July. Only 8%, however, are net long in stock.

Even while the rest of the EV industry faces challenges like trade tensions, declining consumer demand, and heightened competition, Tesla has proven to be a risky company to short. Nearly one-fifth of the hedge funds Hazeltree tracks had placed bets on Tesla in July, but they needed to be more guided when the firm released sales data that set off a sharp increase.

According to the performance of the KraneShares Electric Vehicles and Future Mobility Index ETF, the broader EV industry has lost almost 12% so far this year after a nearly 9% drop in 2023. In contrast, Tesla is up around 30% in 2024 after doubling its value last year.

Additionally, Tesla's success is notable when compared to other green stocks. Concerns that Trump would follow through on his pledge to reduce clean-energy incentives caused renewables stocks, from solar to wind, to plummet as markets processed the news of Trump's victory.