Tesla just crashed, hard.

The stock has halved in three months and has wiped out $700 billion in market value and $100 billion from Elon Musk’s fortune.

While Tesla’s long sellers are in full meltdown mode, hedge fund short sellers are on a high with $16.2 billion in profits.

How did Tesla tank so bad?

Tesla’s stock peaked on December 17, 2024, but has since cratered, with its market cap plunging by more than $700 billion.

The culprit? A sea of falling car sales, political controversies, and economic uncertainties.

Investors had once bet big on Tesla’s stock, as they hoped CEO Elon Musk’s ties to Trump would translate into favorable policies.

Instead, Musk’s pry into European politics and controversial spending cuts as the head of the Department of Government Efficiency have backfired.

According to JPMorgan, Tesla’s brand value has taken a massive dunk.

The bank slashed Tesla’s end-of-year price target to $120 per share (from $135), remarking, “We struggle to think of anything analogous in the history of the automotive industry, in which a brand has lost so much value so quickly.”

Hedge funds cash in on Tesla’s misery

Hedge funds have been circling Tesla like sharks, and their patience has finally paid off.

The biggest winners in all of this? Short sellers, who bet against the stock have now pocketed $16.2 billion in paper profits since December.

Tesla keeps taking hit after hit. The number of shorted Tesla shares has leaped by 16.3% over the past month, reaching 71.5 million shares.

Here’s why you should panic (or not)

Tesla’s downward spiral has erased its post-election profits, and things might get even rockier.

The company’s Q4 earnings were (very) disappointing, and it has warned that Trump’s trade war policies could hit U.S. manufacturing hard.

If retaliatory tariffs come into the mix, the cost of producing Teslas in the U.S. could skyrocket.

Meanwhile, hedge funds are divided on whether Tesla’s slump is just a temporary blip or the beginning of a prolonged downfall.

While short selling was the best strategy for Tesla stocks, Elon Musk has never been a fan of short sellers, and he often mocks them with bizarre tweets.

In 2020, he infamously told critics they were “mentally ill” and that Tesla’s full self-driving technology would soon wipe them out. Fast-forward to 2025, and short sellers are the ones laughing.

Nevertheless, will Tesla bounce back, or is this just the beginning of the end? Hedge funds are betting both ways, but for now, the shorts have the last laugh.