Tesla Short Sellers Lose Billions as Stock Rises to Multi-Quarter High

Tesla stock (NYSE: TSLA) has risen almost 50% since the US elections and is trading at the highest level in nearly two years. While the rally is a welcome break for investors who were long TSLA, as the stock was underperforming the markets before the elections, it has led to massive losses for short sellers who were betting against the Elon Musk run company.

According to Bloomberg calculations based on data from S3 Partners, short sellers have raked in paper loses of over $5.2 billion on Tesla. The losses have only increased since as the stock rallied further yesterday. The short covering is also helping spur the rally in Tesla shares.

Tesla Short Sellers Lose Billions

“We expect continued short covering in TSLA stock due to the rally-induced short squeeze, which will force out many of the 2.4 million shares we saw shorted over the last month,” said S3 Partners head of predictive analytics Ihor Dusaniwsky.

Notably, while Tesla often features among the most shorted stock but betting against the electric vehicle (EV) giant has been a risky proposition. Short sellers lost billions betting against Tesla in 2020 and 2021 as the stock soared 740% and 50% respectively. Cumulatively, short sellers lost $60 billion in these two years shorting TSLA stock.

Short sellers did make $15.85 billion in paper profits in 2022 as Tesla stock fell 65% and had its worst year ever.

However, 2023 was yet another nightmarish year for Tesla bears as the stock rallied smartly amid the tech rally. Tesla shorts were having a good time in 2024 as the stock was in the red for the most part. Meanwhile, Tesla shares rallied sharply after the company’s Q3 earnings release leaving a hole in short sellers’ pockets.

During the earnings call, Musk was quite upbeat on the 2025 delivery outlook and said, “Something like 20% to 30% growth next year is my best guess.” While that guidance at midpoint is half of the 50% long-term delivery guidance that Musk once touted, its nonetheless encouraging considering the current state of the EV industry.

While the stock pared some gains subsequently, it has spiked following Trump’s election adding around $300 billion to its already humongous market cap.

Tesla Stock Has Rallied

Tesla stock has been rallying since Trump’s election which has helped cement Musk’s place as the world’s richest person with his net worth topping $300 billion. The rise in Tesla stock after Trump’s election is not all that hard to comprehend. The company’s CEO Elon Musk was among the biggest backers of Trump and might even land a position in his administration.

Meanwhile, Wall Street analysts – who are otherwise quite divided on Tesla – are getting incrementally bullish on the shares after Trump’s victory.

Wedbush believes that Tesla is a big winner from Trump’s presidency. In its note, the brokerage said, “The biggest positive from a Trump win would be for Tesla and Musk. We believe a Trump presidency would be an overall negative for the EV industry as likely the EV rebates/tax incentives get pulled, however for Tesla we see this as a huge positive.”

Wedbush analyst Dan Ives termed Trump’s victory a “dream scenario for any Tesla bull.” He added, “This could ultimately add $40 to $50 per share to Tesla’s stock right off the bat, and we could now be talking about a $1 trillion [or] $1.5 trillion market cap for Tesla.

Ives raised Tesla’s target price from $300 to $400 and said, “We are raising our price target on Tesla to $400 from $300 as we believe the Trump White House win will be a game-changer for the autonomous and AI story for Tesla and Musk over the coming years.”

Tesla Unveiled Its Robotaxi Last Month

Notably, Tesla is working on the Optimus humanoid and autonomous driving which make it an AI play. Last month, it held the “We, Robot” event where it unveiled the Cybercab robotaxi.

The Cybercab is a low two-seater and has no steering wheels or pedals. The company also revealed that it would produce a bigger vehicle names Cybervan which would have the capacity to carry upto 20 people.

It also showcased the abilities of its Optimus humanoid. Musk said that the humanoid is doing some unspecified tasks in Tesla factory and the company should be able to sell it externally by the end of 2025.

“Optimus will be more valuable than everything else combined because if you’ve got a sentient humanoid robot that is able to navigate reality and do tasks at request, there is no meaningful limit to the size of the economy,” said Musk at the event.

Musk Says Autonomy Accounts for Bulk of TSLA’s Valuation

Notably, Musk believes that autonomous driving drives the bulk of Tesla’s valuation. For nearly a decade now, Musk has been promising full self-driving almost every year. Last year, he said that he would be “disappointed” if the company does not hit the milestone by the end of this year – which it eventually did not.

While Tesla has missed several self-imposed deadlines for full autonomy, Musk is quite categorical that it’s an aim that Tesla continues to strive. “If somebody doesn’t believe Tesla’s going to solve autonomy, I think they should not be an investor in the company,” said the billionaire during the Q1 2024 earnings call earlier this year.

A favorable administration in Washington would help Tesla’s autonomous driving endeavors even as Trump might scale back EV tax credit.

In his note, Ives said, “under a Trump White House these key initiatives (autonomous driving and AI) will get fast tracked as the federal regulatory spiderweb that Musk & Co. have encountered over the past few years around FSD/autonomous clears significantly under a new Trump era.”