"Retail Army" ignores Musk-Trump dispute and invests $650 million in leveraged bottoming of Tesla, Inc. (TSLA.US)

Last week, when Elon Musk's wealth shrank by $36 billion and Tesla, Inc. (TSLA.US) stock prices plummeted, his most ardent supporters were eagerly buying in with leverage. Compiled data shows that investors poured $651 million into the 2x long TSLA ETF-Direxion (TSLL.US), marking the largest single-week inflow for the fund since its listing in 2022, with the majority of funds entering the market on Thursday and Friday. This buying frenzy targeting TSLL (which aims to provide double the daily return of Tesla, Inc.) reflects a familiar investment logic: doubling down on Musk amidst a sell-off - a strategy that has worked miracles in the past. However, the difference this time is that as this tech leader openly clashes with President Trump over a landmark tax reform bill, this trade is facing unprecedented risks, revealing significant cracks in Musk's political capital. Aside from personal grievances, Tesla, Inc. is also facing dual pressures from intensified competition in the Chinese market and cooling demand in developed markets. Compared to the high valuation multiples that traditional car manufacturers maintain year-round, the valuation rationale for this electric car maker is continuously questioned. But none of this has shaken the steadfast belief - or rather, speculative enthusiasm - of retail investors, who have profited handsomely from betting on Musk's comeback several times. Chief Market Strategist at Miller Tabak + Co., Matt Maley, stated, "Retail investors have always been good at buying the dip when Musk stumbles, and once again they see the recent plunge as a buying opportunity. But considering the challenges facing Tesla, Inc., this bottom fishing seems premature." The friendship previously established between Musk and Trump, as Musk assisted in Trump's election campaign and funded his 2024 re-election efforts, collapsed last week due to their disagreement over Trump's "One Big Beautiful Bill" tax reform proposal. Musk's critical remarks prompted Trump to publicly express disappointment with Musk, leading to a full-blown conflict on Thursday. The conflict persisted throughout the day: Trump berated the billionaire CEO as "crazy" and threatened to cancel government contracts, while Musk retorted that Trump couldn't win the election without him. As a result, Tesla, Inc. stock prices plummeted, with Musk's net worth evaporating by $34 billion in just one day on Thursday, and falling by 15% for the week to close around $295 on Friday. However, historical data shows that buying the dip in Tesla, Inc. stock prices during a freefall often yields returns. During the pandemic, the company's stock price fell to $60 before rebounding; in its first year of listing in 2022, despite Tesla, Inc. plummeting by 65%, the ETF saw $300 million in inflows, and the stock surged by 102% the following year. Judging by the flow of funds into TSLL, it is clear that the bulls of Tesla, Inc. are not deterred by the Musk-Trump turmoil. This year alone, the ETF has attracted over $3.5 billion in inflows, despite Tesla, Inc. stock prices dropping by over 26% year-to-date - a figure that is more than three times the inflow amount for the entire year of 2024 when Tesla, Inc. stock prices rose by over 60%.