Retail investors quickly capitalized on the sharp drop in Tesla stock following a dramatic public fallout between U.S. President Donald Trump and Tesla CEO Elon Musk. The clash, triggered by Trump’s threat to cut off government contracts with Musk’s companies, unfolded across social media and sent shockwaves through the market. The dispute centered on the president’s tax-cut legislation and marked a rare rupture between two influential figures who previously maintained close ties.
Retail Investors Drive Rebound, Scoop Up Tesla Shares After Sharp Price Decline
Tesla’s stock experienced a significant 14.3% decline on Thursday, marking its 11th worst daily performance since going public in 2010. However, bargain-hunting by retail investors contributed to a partial recovery, with the stock rebounding 5.6% to $299 by mid-Friday.
Although the precise influence of retail investors on the recovery was unclear, their trading activity was notable. Vanda Research reported that individual investors purchased a net $201.3 million in Tesla shares, making it the second-most actively bought stock by retail traders on the day.
Retail Investors Rally Behind Tesla After Trump-Musk Clash Triggers Stock PlungeRetail investors, known for their affinity toward Tesla, demonstrated renewed risk appetite amid the chaos. Many saw the dip as a buying opportunity, a sentiment echoed by Marco Iachini of Vanda Research. Beyond buying Tesla shares, retail investors also turned to leveraged exchange-traded funds (ETFs) like the Direxion Daily 2x Bull ETF, which saw $41.5 million in net inflows. This behavior reflects a broader pattern of bullish sentiment among small investors who are eager to benefit from volatile market movements.
Options Market Stays Calm as Retail Sentiment Remains Bullish Despite Tesla’s Slide
Despite the dramatic stock plunge, Tesla’s options market remained relatively stable. Chris Murphy of Susquehanna International noted that implied volatility didn’t spike dramatically, indicating that traders weren’t panicking. In fact, some saw it as a chance to profit, selling put options to capitalize on heightened volatility. Tesla’s 30-day implied volatility hit a six-week high of 77 on Thursday but remained below April’s levels and fell to 68 by Friday, suggesting growing market confidence.
Social media sentiment around Tesla remained overwhelmingly positive, even during the selloff. Iachini’s models, which analyzed posts on platforms like Reddit and X (formerly Twitter), indicated that retail investors were largely encouraging a “buy the dip” mentality. Despite Tesla’s recent 37% decline from its December peak—and in contrast to its earlier post-election surge—the company’s retail investor base appears unfazed, maintaining strong belief in the stock’s long-term potential.
