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Tesla has finally broken through the $1 trillion market capitalization mark. The stock price is rising by as much as 10% in a single day. Two weeks ago, when Tesla's market cap was $680 billion, I was the first to predict that it could reach $1 trillion. I will now explain why Tesla's stock price has risen so significantly and what the future holds.
First, the reason for this surge is the presidential election. With Trump becoming president, "Trump trading" is taking place. As you can see, defense stocks, which are part of this Trump trading, are currently hitting new highs. Financial stocks are also currently hitting record highs. Therefore, while there are various regulations expected to change once Trump becomes president, I will summarize the most important points for you.
First, federal oversight and investigations into Elon Musk's companies will be reduced. By easing regulations, the businesses Elon Musk intends to pursue can grow more actively. In particular, there is talk of easing regulations regarding Tesla's autonomous driving technology. The reason autonomous driving is so important is that the stark difference between Tesla and existing automakers—such as Ford or GM—lies in software.
Therefore, once Tesla perfects autonomous driving, Elon Musk's value alone will likely be assessed, rather than the valuation of the automotive company. Starting next year, they plan to gradually expand autonomous driving across the United States, beginning with Texas and California. Furthermore, the appointment of Elon Musk as the head of the new Government Efficiency Commission, responsible for federal spending audits, grants him significant access to the administration.
This allows him to exercise potential influence over personnel decisions and policy. That is the case primarily regarding Tesla. Additionally, Elon Musk manages various other businesses, such as AI policy support, government funding for electric vehicle production, and contractual support for SpaceX and his other ventures.
Therefore, it is highly likely that he will streamline approval procedures for various business plans to achieve efficiency. The overall theme is that if regulations and policies are eased, the company could grow even larger. If you look at automotive companies, GM's PE ratio is 5.9, which is very low.
Generally, the PE ratios of automakers range from 3.1, 3.8, or 7, or at best 8.8, while Tesla's is currently 8.8. This represents a difference of almost double, yet they are being valued at such high levels. The point is that it can be maintained despite the situation. Currently, Tesla's short selling ratio is 2.8%.
It has dropped significantly; in 2020, it was as high as 10% or 133%, but it gradually began to decline. However, starting in 2024, this short selling ratio began to increase. It rose to 3% or 4% and gradually increased, but there was a specific trigger. As the stock price continues to rise, the short selling ratio is also decreasing.
Therefore, it is a situation where stable growth is possible. Meanwhile, a hatch fund that shorted Tesla suffered losses exceeding $5 billion. Recently, it has been understood that Elon Musk and Trump are connected through a very close relationship. That is why they took a photo together again. It is a photo taken after Trump was elected president; Ben Ben, who served as Vice President, is absent, and Mali is not inside Trump's frame, but Elon Musk is included.
So, as you can see in this chart, the short selling ratio remains high, while the stock price continues to rise. This black ginger line confirms that the stock price is proportional to the short selling ratio. So, how much further can Tesla rise from here? Of course, there may be factors like the significant short-term rise, but looking at the current situation, I believe it could reach $400.
Short selling is gradually decreasing, and if you look at the RSI, it is currently at 62. In 2020, 2021, and 2022, the RSI went up to 80 at times. However, it is still at 62. If it rises from 62 using the current momentum, it seems possible to break through $400 and reach $450 or even $ 500. Tesla has just surpassed the $1 trillion mark.
Going from $600 billion to $1 trillion in one fell swoop, new expectations and logic emerge. This could lead to reaching $1.5 trillion or even surpassing Meta. If it goes from its current level to Meta's market cap, it would represent a rise of about 50%. In that case, from the current price of $480, it would likely try to climb to $500.
Then, it would break through $1.5 trillion. $1.6 trillion, and then a new logic emerged, pushing it to $2 trillion; that is the current trend. So, to summarize today's video, I see some people worried because Tesla has risen so much in a short period. While it may be difficult to jump in right now, I think existing holders can put aside the anxiety that drives them to sell.
Since it is just starting to gain momentum and rise, if you hold on from here, it seems possible to reach $400 within this year, or even $500 early next year, provided nothing unusual happens and there are no concerns about an economic recession. So, what risks should we look for here? Regarding inflation, the Consumer Price Index (CPI) is coming out this week.
If you look at core inflation, it had been decreasing, but hit 3.2% for two consecutive months in July and August, and is gradually trending upwards to 3.3% in September. Wall Street currently estimates that it will come out at 3.3% this week, the same as last month, but if it rises from here, the probability of the stock price falling becomes very high.
Therefore, the possibility of a sharp drop after a rapid increase also increases. If the price index rises from here, it becomes very difficult because... right now, what is the situation in the US? Under these circumstances, the Republican Party can very easily pass policies across the Senate, House, and even the presidency.
As of today, November 11th, the Republican Party holds 214 seats in the House, having secured two from the Democratic side. Once they secure just these four seats, the House will become Republican- controlled, leading to significant unity. This makes it very easy to change policies, simplifying fiscal policy significantly.
It creates a situation where they can simply print money to stimulate the economy. Reflecting this, long-term bond yields continue to rise; they were 3.6% in September but have climbed to nearly 4.5%, surging by 1% in just two months. The rise in market interest rates indicates a high likelihood of future inflation and the Federal Reserve maintaining a tight stance.
Therefore, it is crucial that inflation remains low. If it starts to rise, one must begin realizing profits from current returns. This is because stock prices have surged, and there is a high probability of a sharp decline. If the market had risen slowly, it would likely fall briefly and then rebound even with such negative news; however, the emergence of such negative news signals a correction.
However, if inflation... moderately... Whether it goes up or not, it looks like Tesla's stock price could hit $400 within the year and $500 early next year. Please leave your thoughts in the comments. If you found this video helpful, please subscribe and like. I will see you again in the next video with new information.
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