The Tesla Stock Hype: A Case Study in Speculation, Hype Investing, and Market Bubbles

The Hype Train and Its Consequences

On November 11, 2024, I wrote:

“I just read something that said sell out of all your investments. My automatic response was ‘nope.’ Look, no matter what happens, there will be ups and downs in the market, and sometimes things will get ugly. Shit, I am scared too. But I also studied under some of the greatest investors before I got into serious investing, and this dark period in life was talked about. It will be those who can stomach these hard times that will come out richer on the other end.”

At the time, people were rushing to buy Tesla stock because of the election and Elon’s connection to Trump. I said people were going to lose money, not because I had some crystal ball, but because this pattern has played out over and over in market history. When people invest based on hype instead of real business fundamentals, the outcome is almost always the same.

Then, on February 26, 2025, I followed up:

“I wrote about this after the election, about how MAGA and Trump/Elon supporters were buying the stock. I said people were going to lose money. Do I feel bad? Not at all. Most bought in at the top, and those that bought just after the election are close to losing it all.”

And by March 11, 2025, it all came full circle—Tesla’s post-election stock rally was completely wiped out, losing its 91% gain.

I didn’t predict that exact date, but March 11th proved my prediction right. The hype had faded, and reality had set in.

What happened? And more importantly, what lessons can we take from this?

This article breaks down the Tesla hype, why some investors got burned, and how you can avoid the same mistakes.

The Psychology of Hype Investing

Investing isn’t just about numbers, it’s about human psychology. When a stock starts skyrocketing, people get caught up in FOMO (Fear of Missing Out) and rush to buy, believing they’ll make quick money. But what many fail to realize is that by the time everyone is talking about a stock, it’s already too late to get in at a good price.

This was exactly what happened with Tesla after the election. Many MAGA and Trump/Elon supporters started buying the stock not because of Tesla’s fundamentals, but because they believed Elon’s influence in a Trump-led government would somehow make them rich.

But investing in hype rather than the business itself is a losing game. Let’s break it down.

Why Some Companies Survive Everything (And Others Don’t)

The most valuable lesson I give to friends and family is this: Stocks are just shares of a business.

For example, let’s look at Coca-Cola and Hershey:

• Coca-Cola: Survived wars, recessions, inflation, scandals, and more. No matter what happens, people are still drinking Coke.
• Hershey: Can you imagine a world without Hershey bars? Highly unlikely. Even if the economy tanks, people still buy chocolate.

Both of these companies are considered “safe” investments because they are mature businesses with a long track record of surviving economic downturns. Even if the stock market crashes by 50%, your ownership in Coca-Cola or Hershey doesn’t change.

Now, compare that to Tesla:

• Unlike Coca-Cola or Hershey, Tesla is still a high-growth, volatile stock.
• It relies on hype and speculative future earnings, not just solid business fundamentals.
• While it’s an innovative company, it hasn’t proven it can weather multiple economic crises over decades like Coke or Hershey.

This brings us to Brad.

The “Brad” Effect: A Case Study in Emotional Investing

Let’s take a guy named Brad.

Brad hears that Elon Musk is “in bed with Trump,” so he decides to go all-in on Tesla stock before the election. He buys at multiple price points:

• $322
• $348
• $358
• $360
• $378

At first, it seems like a great idea, Tesla’s stock keeps climbing. But then the hype dies down and the stock starts falling.

Now Tesla is at $340, and suddenly Brad realizes:

• He’s losing money on every share except the one he bought at $322.
• Since he bought purely on speculation and hype, he has no long-term conviction.
• Panic sets in, and he sells all his shares at a loss.

Here’s why Brad lost money:

• He bought for the wrong reasons (hype instead of fundamentals).
• He didn’t have an investment strategy beyond “this stock is going up!”
• When the hype collapsed, he panicked and sold at a loss instead of holding long-term.

It’s like spending $100 five times, then getting a refund but only walking away with one of those $100 bills. You still lost $400.

This is how most speculative investors lose money.

The Role of Elections in Stock Market Bubbles

Elections create market volatility, and investors often get caught up in it.

• Some stocks skyrocket on speculation about political outcomes.
• After the election, the hype fades, and the stock crashes back down.
• Retail investors who bought in at the peak lose money, while experienced investors cash out early.

This happened with Tesla. After the election, MAGA investors thought Tesla would soar indefinitely because of Elon’s ties to Trump. But stocks don’t work like that.

By March 11, 2025, Tesla’s 91% election rally gain disappeared. Those who bought in after the election are close to losing it all.

Am I happy this happened? No.
Do I feel bad? No.
Did I warn people? Yes.

Lessons from the Tesla Stock Bubble

1. Investing Should Be a Long Game

The best investors don’t chase quick profits. They buy stocks they believe in and hold for years.

2. Know What You Own

Tesla isn’t Coca-Cola or Hershey. It’s a highly volatile tech stock, not a safe blue-chip investment.

3. Hype Fades, But Fundamentals Last

Stocks driven by political speculation or celebrity hype rarely hold their gains. Business fundamentals matter more than headlines.

4. Don’t Buy on FOMO

If everyone is talking about a stock, it’s already too late to get in early. Buy based on research, not emotions.

5. Avoid the Brad Effect

Don’t be like Brad. If you invest, have a plan and stick to it. Panic selling only locks in losses.

Conclusion: The Market Rewards Patience, Not Panic

Tesla’s stock hype was a textbook example of how speculative investors lose money. Those who bought on hype got burned, while those who understood business fundamentals stayed out or made strategic moves.

The market will always have boom-and-bust cycles, but the real winners are those who can stomach the downturns and invest wisely.

Final Thought: Before buying a stock, ask yourself, are you investing in a solid business or just chasing the next hype train? Because history shows that the second option rarely ends well.