Elon Musk’s Tesla has fallen sharply after the equity market bull run following Donald Trump’s inauguration ended – Jim Watson/AFP
One of the surest turn-of-the-year bets was that we had reached peak Elon Musk and that, from there on in, it would be downhill all the way for the Tesla, SpaceX and Twitter impresario. But few foresaw the speed of the tumble.
Not that he’s exactly been impoverished by it; by dint of the multiple different business success stories he’s spawned, Musk is still – according to Forbes magazine, which tracks the wealth of top multibillionaires in real time – far and away the world’s richest man.
All the same, in three short months, the Tesla share price has plunged by 40pc, driven mainly by a sharp fall-off in European sales, growing Chinese competition, concern that Tesla was about to take a stake in Nissan, and fears that Musk’s alt-Right politics have badly damaged the brand in target consumer markets.
The sell-off is admittedly by no means confined to Musk. It’s tech industry wide. Since their recent highs, shares in Peter Thiel’s Palantir Technologies have fallen 32pc, Nvidia and Microsoft are down by 15pc and Alphabet is down by 16pc. Not far behind are Meta and Apple, down by 9pc and 7pc respectively.
It already seems like a long time since the bosses of America’s tech giants lined up in craven self-interest alongside Trump for his inauguration.
Public opinion is increasingly hostile toward ‘big tech’ bosses and the power they wield – Julia Demaree Nikhinson/AP Photo/Bloomberg
Since then, a lot of the shine has come off tech stock valuations, proving once again the old stock market adage that it is better to travel hopefully than to arrive.
The hope in this case was a combination of artificial intelligence (AI), in which the tech giants are investing hundreds of billions of dollars, and the pro-business, deregulatory leanings of Trump himself.
Since the inauguration, investors have been given reason to question both assumptions.
On AI, they’ve suffered the double blow of emerging, and much cheaper, Chinese competition and a noticeable swing in public opinion against the power of “big tech”.
Tech bashing in both mainstream and social media is now as common as bank bashing used to be, with tech replacing finance as the bogeyman of today’s business landscape.
I realise that this has been said many times before, only for the leviathans of tech to grow bigger still. But the direction of travel is now unmistakable.
Survey after survey finds the tech giants to be some of the most-hated institutions in the world. Even in the US, a substantial majority of both Republicans and Democrats believe that they wield too much power.
I doubt Maga devotees will quickly fill the emerging hole in Tesla’s sales left by well-healed, right-on, environmentally conscious types. It is no longer considered cool to drive a Tesla, certainly in Europe, while in China there are now cheaper and better marques to choose from.
In any case, if the company is already at its high water mark, then it is hard to see how it can justify a market capitalisation that is still nearly 25 times greater than that of Ford. It makes no sense, even for true believers in Musk’s genius and the idea of a Tesla as AI on wheels.
The other reason for turning negative on markets is the shape of the US economy, which is fast losing its recent buoyancy.
Again, a US downturn has been forecast many times before, only for the economy to defy the doomsayers.
But tougher times ahead are already starting to show in the data, with inflationary expectations rising and consumers beginning to worry about the extent of the public sector job losses being overseen by Musk in his role as head of the Department of Government Efficiency (Doge).
On top of everything else the US is sliding towards another government shutdown.
But what most troubles markets is the prospect, now that much more real, of an all-out trade war with Canada, Mexico and Europe. Just last week, the Federal Reserve Bank of Atlanta dramatically changed its guidance for first quarter growth from an expansion of 2.3pc to a contraction of 1.5pc, citing the impact on net trade of Trump’s tariffs.
Overnight, the US started charging a 25pc tariff on Canadian and Mexican goods. The tariff on China has meanwhile been doubled to 20pc. Retaliatory action has been swift. All this will have a deeply chilling effect on the world economy, never mind international relations.
Part of the problem with US stock markets is that they have become overly top-heavy, with just seven stocks – the “magnificent seven” of Apple, Alphabet, Amazon, Microsoft, Meta, Nvidia and Tesla – accounting for nearly a third of the entire market capitalisation of the S&P 500.
Growth in passive, or index tracking, investment has further enhanced this relative dominance, making the stock market much more vulnerable to shifts in sentiment.
It is perhaps encouraging that the sell-off in tech has to date been somewhat countered by a rotation into more defensive, less growth orientated, non-tech stocks – where valuations are less stretched. The upshot is that the S&P 500 as a whole is “only” 5pc off its recent all-time high, though this was before overnight news of the new tariffs.
Fortunately for its current performance, Britain’s unloved FTSE 100 never had a significant tech presence in the first place, and buoyed by hopes of a European boom in defence spending, now trades at an all-time high.
Even so, things get precarious when they’ve climbed this far. For now, markets remain very much in “risk-off” mood – witness the recent fall in US Treasury yields.
It’s not yet a crash, or even a correction, but I doubt very much that we have yet seen the bottom for the likes of Elon Musk.
