Tesla shares claw back as investors cheer Musk-Trump peace call

Tesla shares rose on Friday as investors took some comfort from White House aides scheduling a call with CEO Elon Musk to broker peace after a public feud with US President Donald Trump.

Trump threatened to cut off government contracts to Musk’s companies, while Musk suggested Trump should be impeached, turning their relationship into an all-out brawl on social media.

The electric carmaker’s shares were up about 5% in Frankfurt on Friday, having closed down 14.3% on Thursday in New York, losing about $150bn in market value.

“It’s unlikely that Trump will end subsidies and contracts with Tesla. Those are obviously threats that are unlikely to come to fruition,” said Fiona Cincotta, senior market analyst at City Index.

“I don’t expect this to blow out into anything more serious than a war of words for a couple of days.”

Analysts said some of Thursday’s selloff was down to factors beyond Musk’s personal relationship with the president.

“We think the stock’s sell-off reflects a number of other factors: an unjustified run-up following its quarter one earnings release, ongoing market share losses in China and Europe, and a realisation that next week’s Robotaxi launch in Austin could disappoint,” Garrett Nelson, senior equity analyst at CFRA Research, said in a note.

“We remain at Hold, expecting more volatility in the near term. Buckle up,” he said.

Tesla shares, which hit record highs when Trump won the election in November, have since been punished harshly, as Musk’s cost-cutting role in the US administration hurt Tesla’s image with shareholders and consumers alike.

The stock is still considered part of Wall Street’s elite “Magnificent 7” club of the seven biggest companies by market cap, even though it has now dropped to ninth position in terms of value, behind Warren Buffett’s Berkshire Hathaway and Broadcom. It has also dropped out of the $1-trillion club of companies with market value above this level.

The broader stock market got hit on Thursday as the feud between Musk and Trump intensified. By Friday, with signs of a possible truce on the horizon, stock futures turned higher as well, with those on the S&P 500 up 0.4%.

“Elon Musk has already signalled that he is open to a cooling-off period with Trump, and stock market futures are higher on Friday morning. Thus, the risk could be more localised with Tesla shares in the short term,” Kathleen Brooks, XTB research director, said. 

Reuters