Tesla's Staggering Rally - And Why It Might Not Last

What happened to trigger the turnaround? Nothing at the company, where demand for its cars is still wobbly and the future looks increasingly uncertain. Rather it was what investors regard as a political masterstroke by Tesla's leader, Elon Musk, aggressively supporting President-elect Donald Trump on the campaign trail and taking an unofficial role in his administration.

"How do you put a value on the fact that Musk has deep access with the incoming administration?" said Steve Sosnick, chief strategist at Interactive Brokers. "You can assign almost any number to it."

Investors seem to be doing just that. Prior to the US presidential election Tesla shares were down 2.3 for the year. Since election day, they've soared 73, putting them up 69 for 2024. Meaning, in less than two months, the EV maker has added a staggering US572-billion R10.5-trillion to its market capitalisation, bringing it to around 1.4-trillion, although nothing about the company fundamentally changed.

Between 500-billion and 600-billion of Tesla's market cap is based on its EV and energy businesses, according to Evercore ISI analyst Chris McNally, with the rest ascribed to "things to come", such as self-driving cars and humanoid robots. And calculations by Nicholas Colas, co-founder of DataTrek Research, show that over 90 of Tesla's share price is tied to what the company might do in the future.

You can see it in the company's earnings valuations relative to another high-flyer the artificial intelligence chip giant Nvidia. Until recently, Nvidia was considered the hottest stock in the market. Now it's Tesla's turn. But based on their price-to-earnings ratios, these are two very different businesses. Nvidia is currently trading at 32x its projected earnings over the next 12 months, Tesla is at 129x.