Tesla's stock price drops 8%, reversing some of the gains made after the election.

• On Wednesday, Tesla's shares experienced their largest decline since before Trump's election victory, with a drop of over 8%.
• Despite the recent decline, the stock has remained up 75% since the election and reached a new record on Dec. 11, surpassing its previous high in 2021.
• Analysts at Barclays were taken aback by the immense size of the rally, as most investors they interact with expressed surprise.

On Wednesday, shares of the company sank more than 8%, marking their steepest decline since before the election of Donald Trump last month, which led to a sharp rally in the stock market.

Tesla's stock price of $440.13 on Tuesday represents a 75% increase since Election Day on Nov. 5. Last week, Tesla reached a new record high, surpassing its previous high from 2021. Despite a drop in stock price on Wednesday, Tesla had been climbing steadily, reaching a closing high of $479.86 on Tuesday.

Analysts at Barclays wrote in a report on Wednesday that most investors they speak to are stunned by the magnitude of the rally and increasingly confused on how to handle the stock, given how widely disconnected it appears to be from fundamentals. They have given the stock an equivalent of a hold rating and a $270 price target.

The decline in the broader market, including a 3.6% drop in the Nasdaq, coincided with the pullback.

Tesla had its best monthly performance since January 2023 with a 38% rally in November, which was its 10th best on record. CEO Elon Musk was a significant supporter of Trump, donating $277 million to his campaign, as per Federal Election Commission filings.

Elon Musk, the wealthiest person globally, will head the "Department of Government Efficiency" in the Trump administration, which will serve as an advisory office alongside Vivek Ramaswamy, a former Republican presidential candidate.

Musk, who runs SpaceX and owns a social media company, could gain influence over federal agencies' budgets, staffing, and the ability to push for the elimination of regulations with his new role. During a Tesla earnings call in October, Musk stated that he intended to use his influence with Trump to establish a "federal approval process for autonomous vehicles."

Waymo, Tesla's major domestic competitor, announced on Wednesday that it had conducted over 4 million paid robotaxi trips in 2024 as it expanded its commercial operations in the U.S.

"Tesla, being the only Elon Musk company publicly traded, has often been used as a proxy for an investment in Musk himself. As a result, the value of Tesla stock has increased, which further amplifies the already-high key man risk associated with the stock, according to Barclays analysts."

A Quinnipiac poll revealed that 53% of US voters disapprove of Elon Musk's significant role in the Trump administration. The divide was substantial among party and gender lines, with only 31% of women and 5% of Democrats expressing approval.

Recently, Musk has expressed dissatisfaction with the SEC's "settlement demand" related to his 2022 sale of Tesla shares while he was also trying to acquire Twitter, now called X.

The SEC spokesperson refused to discuss the matter, stating that the agency conducts investigations confidentially to maintain the integrity of its process.

Tesla will reveal its fourth-quarter and year-end vehicle deliveries in January. Since the introduction of Cybertruck deliveries in November 2023, Tesla has been focusing on promoting its EVs through various incentives, including 0% financing.

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