The Rundown - Deep Dive: What Elon Musk's All-In Bet on Trump Means for Tesla

Episode Date: November 9, 2024

This weekend’s deep dive explores Elon Musk's high-stakes gamble on a Trump presidency and what it means for Tesla’s future. From Musk’s $131 million investment in Trump’s campaign to the potential policy shifts that could impact Tesla’s electric vehicles, AI ambitions, and clean energy ventures, we break it all down. Will a pro-business, deregulated environment benefit Tesla, or will it face challenges from tariffs and shifting energy policies? Join us as we unpack the implications of Musk's newfound alliance with Trump on Tesla's diverse business portfolio. The content of the video is for general and informational purposes only. All views presented in this show reflect the opinions of the guest and the host. You should not take a mention of any asset, be it cryptocurrency or a publicly traded security as a recommendation to buy, sell or hold that cryptocurrency or security. Guests and hosts are not affiliated with or endorsed by Public Holdings or its subsidiaries. You should make your own financial and investment decisions or consult respective professionals. Full disclosures are in the channel description. Learn more at Public.com/disclosures. Past performance is not a guarantee of future results. There is a possibility of loss with any investment. Historical or hypothetical performance results, if mentioned, are presented for illustrative purposes only. Do not infer or assume that any securities, sectors or markets described in the videos were or will be profitable. Any statements of future expectations and other forward-looking statements are strictly based on the current views, opinion, or assumptions of the person presenting them, and should not be taken as an indicator of performance nor should be relied upon as an investment advice.

Welcome to a weekend edition of The Rundown, where we do a five-minute deep dive on one topic. In today's episode, we're diving into Elon Musk's big bet on Donald Trump to win back the White House. We'll talk about how the bromance between Trump and Elon started, why Elon spent over $100 million on Trump's campaign. And now that Trump has won the election, what it could mean for Tesla moving forward. In this episode, we're going to be talking Tesla, AI, self-driving cars, clean energy. There's a lot to cover. So let's get into it. This past week, Donald Trump was elected the president of the United States of America.

But this episode is going to focus on Elon Musk because Elon went all in on Donald Trump's campaign. And that big bet is already starting to pay off. Tesla's stock rallied 29% this week, pushing its market cap to over $1 trillion. And as a result, Elon's net worth jumped $50 billion this week to over $313 billion. So I'd say that the $100,000,000,000. $131 million that Elon spent on the Trump campaign is paying off pretty well. And I think the biggest element in all of this is that Elon has turned Trump to be pro-EV, because Trump has been critical of the EV industry in the past. But that tone started quieting down once Elon endorsed Trump

and started being involved in his campaign. And now that Elon and Trump are boys, Elon might get a cabinet position in Trump's administration. The prediction market website Polymarket is giving it a 21% chance at the time of this recording. So why did Elon decide to embrace Trump in the first place, despite Trump being anti-EV in the past, and not the Biden administration who has been pro-EV? Well, the Biden administration, despite being pro-EV, they weren't exactly pro-Tesla. I think the relationship between Elon Musk and the Biden administration really took a hit back in 2021 when the White House hosted an EV summit and they left Tesla off the list. Kind of a weird move. That's like hosting an AI summit, but not inviting.

invidia. And then on top of that, Biden made a visit to a GM factory in Detroit and lauded GM as the leader in the EV space. Mary, I can remember talking to you way back in January about the need for America to lead in electric vehicles. And I can remember your dramatic announcement that by 2035 GM would be 100% electric. You change the whole story, Mary, wherever you are. There you are. You did, Mary. You electrify. the entire automobile industry. I'm serious. You led and it matters.

Biden was talking about the CEO of GM Mary Barra in that clip. And I would say that's kind of a head scratcher of a comment. Because when Biden made that statement back in 2021, Tesla had about two-thirds of all EVs on the road at that time. And just comparing delivery numbers from back then, Tesla had delivered more than 180,000 EVs in 2021. And GM had delivered just 26,000. So yeah, I would say that Elon took that.

statement from Biden pretty personally. So Elon decides to become boys with Trump, don't need a lot of money to his campaign, he wins the presidency, and now investors think this bromance between Musk and Trump is good news for Tesla. That's why the stock jumped up so much this week. Now, there's still a lot of unknowns as Donald Trump starts his second term as president. But if Trump stays true to his word on the campaign trail, then we can expect deregulation. Maybe Trump will pull back the Inflation Reduction Act, and there's also the whole tariffs thing. And there are both pros and cons on how those policy decisions could impact Tesla's business.

So that's what we're going to do. We're going to break it down into three buckets. Electric vehicles, AI, and clean energy. So let's get into those. All right, let's start with the EV business, which is still the bulk of Tesla's business, even though they're starting to look less and less like just an automaker. But we'll get to that.

Now, being pro EV isn't really a core part of Trump's message or platform. And it could be because, broadly speaking, Republicans don't really view them very favorably. A Gallup poll published back in April of 2023 said that 71% of Republicans refused to buy a battery-powered vehicle compared to just 17% of Democrats. Now, I wonder if that's going to change now that Elon Musk seems to be playing a big role in Trump's administration. Wed Bush Security's analyst Dan Ives said in a note this week that Trump is a negative for the overall EV industry because EV rebates and tax incentives might be pulled. But Ives also said that Tesla could be the exception to that rule because, because Tesla has a scale and scope that could give them an advantage in a non-subsidy environment.

Now, beyond getting rid of incentives for EVs, the other major move that Trump could make is tariffs. Trump has threatened 60% tariffs on U.S. imports of Chinese goods. And that could have an impact on Tesla's business, both good and bad. The positive effect of these tariffs could be that it could make it really hard for the Chinese EV companies to compete in the U.S. market. China has some of the biggest EV companies in the world. But the negative effect is that China could retaliate causing a trade war, which would hurt Tesla's business in China. And that's a big deal, because right now China accounts for about 40% of Tesla's overall deliveries, according to Wedbush. So, you know, tariffs could be a double-edged sword for Tesla. We'll have to kind of wait and see

to see how it plays out. Now let's talk AI. Trump hasn't really said much about artificial intelligence, but one aspect of a Trump presidency that isn't really ambiguous is regulation. There's going to be less of it, and that's good news for Tesla's AI and self-driving ambitions. No, some people seem to believe that Trump will allow AI innovators to keep their foot on the pedal to prevent China from taking the lead on AI technology. And that's why some people on Wall Street, including Dan Ives, believe that Tesla's self-driving targets will come to fruition earlier than expected. If Tesla has to deal with less regulation, that makes it easier for them to work on their self-driving tech. And I think this is what's making Tesla investors the most excited about a Trump presidency.

Because there is a lot riding on Tesla executing its full self-driving tech and its fleet of autonomous vehicles. Like the cyber cab they showed off a few weeks ago, expectations for Tesla to pull that off is pretty high. And if they do, that could unlock billions or trillions of dollars in value. In fact, Dan Ives, who we've talked a lot about on this episode, thinks that Tesla is the most undervalued AI play in the market and estimates that the AI autonomous piece of the business is worth $1 trillion alone. And he's not the only one, Ark Invest, which is led by Kathy Wood, thinks an autonomous taxi platform would unlock a multi-trillion dollar market that will eventually end up dominating

Tesla's market valuation. Now look, I'm an optimistic person and I hope Tesla can pull this off so I don't have to drive as often. But some of these predictions are pretty wild. But yeah, that seems to be the biggest bullcase for Tesla under a Trump administration. Favorable regulations for autonomous vehicles. All right, so we've talked about EVEs, we've talked about self-driving cars, we've talked about AI. But flying under the radar is Tesla's energy storage business. Elon Musk says that it's growing like wildfire and he has the numbers to back it up. In Tesla's most recent quarter, energy generation and storage revenue was up 52% year over year, compared to just 2% for the automotive business. And Wall Street especially loves the fact that the energy business achieved a gross

margin of 30% in Q3. So the business is growing with record profit margins. That's great news. Tesla points to the success of their power wall, which achieved a record deployment in Q3 for the second quarter in a row. Now, Tesla's energy storage division relies on renewable energy, like solar panels. Like the power wall, for example, stores energy from solar panels and provides backup power for homeowners during outages. And it also helps manage energy consumption. Tesla also makes something called the Megapack, which is a large-scale battery system intended for commercial projects or utilities. The megapac integrates renewable sources, stabilizes the grid, and helps prevent outages. So Tesla's energy storage business relies on clean and renewable energy.

Now, Trump has threatened to repeal the Inflation Reduction Act. I mean, let's be honest, advancing the clean energy movement isn't exactly on top of it. Trump's to-do list. And that's why solar stocks and other renewable energy companies tanked this week. So if the renewable energy movement is impacted during Trump's presidency, that could have an impact on Tesla's fastest growing business, which is energy storage. Something to keep an eye on. Well, all right, guys, that's the first weekend deep dive for the rundown. There's a lot to unpack with this new bromance between Elon Musk and Donald Trump and how it will ultimately impact Tesla's increasingly diverse business. Hope you guys enjoyed today's episode. Thank you for spending

as part of your weekend with us. Let us know what you think about this episode. Got a comment on Spotify on YouTube, write a review on Apple, and tell us what topics you'd be interested in learning more about for us to cover on future weekend deep times. Have a great rest of the weekend, everybody. Shout out to Mike and Connor for all the help behind the scenes. And we'll see you guys back here on Monday. This is the rundown, your real-time resource for news events and trends in the markets. All views presented in the show reflect the opinions of the guests. You should not take any mention of a publicly traded security as recommendation to buy, sell or hold that security.

Rounddown guests are not financial advisors and are not affiliated with public holdings or its subsidiaries. You should make your own financial and investment decisions or consult. Respected professionals. Learn more at public.com disclosures. In partnership with Zaidamani, brokerage services for U.S. listed, registered securities are offered by Open to the Public Investing Incorporated, member FINRA and SIPC.