After spending most of the first half of 2024 as one of the worst-performing S&P 500 stocks, Tesla Motors (NASDAQ: TSLA) entered into an explosive rally that sent it to its year’s end prices near $430.
Such a massive upsurge not only blew past TSLA shares’ old all-time highs (ATH) but also raised the question of just how high Elon Musk’s electric vehicle (EV) maker can go in 2025.
Why Tesla shares could trade at $500 in 2025
To begin with, though most Wall Street experts consider Donald Trump’s victory as something of a setback for the EV industry due to an expected weakening of the green energy drive and a pivot back to a ‘drill baby drill’ policy, Tesla was widely expected to benefit from such headwinds.
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Specifically, as the biggest West-based firm in the industry, Tesla Motors is far better equipped to weather the storm than its competitors, such as Rivian (NASDAQ: RIVN) and even the Saudi-backed Lucid (NASDAQ: LCID).
Furthemore, many believe that Elon Musk’s role in the Trump administration as the co-head of the Department of Government Efficiency (D.O.G.E) would help boost his companies both in terms of public visibility and government contacts.
In addition to such tailwinds, the incoming administration is expected to remove some of the issues that have been plaguing Tesla – and Musk’s other companies – for years.
Looking at the number of probes, investigations, and disputes the South African-Canadian-American billionaire’s companies are involved in – including a probe about wrongful deaths possibly caused by Tesla’s self-driving technology – the increasing calls for deregulation and stripping down of Federal watchdogs begin appearing only logical.
Elon Musk has also been moving to position Tesla as more than either a car maker and an EV revolutionary and a proper big tech and artificial intelligence (AI) company.
Should the claims about advanced AI and commercial-level robotics prove true, TSLA shares would find it much easier to hit $500 in 2025 or even $1,000, as some long-term technical analysis (TA) appears to point toward.
Why $500 price target remains ambitious despite the recent TSLA stock rally
On the other hand, there is no shortage of factors that could provide stout roadblocks on Tesla’s road to $500 in the new year.
The anticipated Trade Wars under the incoming administration could significantly hamper the EV giant’s supply lines and diminish its ability to penetrate emerging markets. On the flip side, they would also likely lessen the pressure form Tesla’s biggest competitors, which are all, incidentally, located in China.
The AI and big tech positioning could itself prove a risk. Though it is entirely possible that Elon Musk’s claims about the advancements made by his company are true, the billionaire has a history of overpromising and underdelivering.
So far, investors have been mostly forgiving about products and features that were never delivered or were years late, but there is no telling when such a trend could change.
Finally, as evidenced by the late 2024 downturn, there are some broader risks and concerns about the 2025 stock market. On the one hand, for all the bullishness, some experts have been warning of a possibly unsustainable bubble for months.
On the other hand, the latest meeting of the Federal Open Market Committee (FOMC) revealed that inflation in the new year will run higher than was previously expected – a revelation that triggered a swift, $1.5 trillion stock market wipe.
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