Why Tesla Stock Jumped 38% in November

After an underwhelming year, Tesla (NASDAQ: TSLA) stock soared last month, boosted by hopes that Trump's victory would help the electric vehicle (EV) maker, as CEO Elon Musk has made himself a close ally to president-elect Trump, spending heavily to aid his campaign before the election.

As a result, the stock soared after the election, and it continued to climb as investors seemed to bet that regulations under the Trump administration would be favorable to Tesla.

The stock peaked on Nov. 11 and then traded sideways over the rest of the month on mixed news. According to data from S&P Global Market Intelligence, the stock gained 38% over November. As you can see from the chart below, all of the stock's gains came in the days following the election.

TSLA data by YCharts.

Musk picks the winning horse

It's understandable that Tesla rose on Trump's victory as Musk was one of his most visible and vocal supporters, essentially going all-in on the former president.

However, while Musk does have Trump's ear and is running the Department of Government Efficiency, it's less clear how the Trump administration can help Tesla. Musk hopes that the new administration will federalize autonomous-vehicle regulations, which would help Tesla get its new Cybercab on the road, but the real test for those vehicles will be safety as there's likely to be an outcry if they are allowed on the road without clearing reasonable safety standards.

Additionally, Trump is well known as a supporter of fossil fuels and an opponent of EVs, and he has already said he planned to remove the $7,500 EV tax credit. Musk said that the effects of that move would be much greater on Tesla's rivals than it would be on Tesla, but it still shows that the new administration will be less friendly to renewable energy than the Biden administration was, which could be a challenge for Tesla.

Image source: Tesla.

What's next for Tesla

As a business, Tesla has struggled this year with revenue stagnating and profits falling for much of the year, though it surprised investors with its third-quarter earnings report, which included solid profit growth.

Trump's tariff threats could also pose challenges to Tesla as could rising tensions with China, which is a major market for Tesla.

At the current valuation, there are high expectations baked into the stock. While Musk has projected production growth of 20% or more next year, investors seem to be expecting progress on autonomy and other wins related to the Trump administration.

Investors should moderate their expectations given the business's recent challenges, and there's also the possibility that the Trump administration may not be as big of a help to the company as investors hope.