Tesla shares sank more than 8% on Wednesday, notching their steepest drop since before Donald Trump’s election victory last month, which sparked a sharp rally in the stock.

Tesla closed at $440.13, and is still up 75% since Election Day on Nov. 5. Last week, the stock climbed to a record, surpassing its prior high reached in 2021. Ahead of Wednesday’s drop, it had continued going up, closing at a high of $479.86 on Tuesday.

“Most investors we speak to have been stunned by the magnitude of the rally, and are increasingly confused on how to handle the stock given how widely disconnected it appears to be from fundamentals,” analysts at Barclays wrote in a report on Wednesday. They have the equivalent of a hold rating on the stock and a $270 price target.

The pullback coincided with a steep drop in the broader market, including a 3.6% plunge in the Nasdaq, the second-worst day of the year for the tech-heavy index.

Tesla is coming off a 38% rally in November, its best monthly performance since January 2023 and its 10th best on record. CEO Elon Musk was a major Trump backer, pouring in $277 million primarily into his campaign effort, according to Federal Election Commission filings.

Now Musk, the world’s richest person, is set to to lead the Trump administration’s “Department of Government Efficiency,” which is expected to function as an advisory office, alongside onetime Republican presidential candidate Vivek Ramaswamy.

His new role could give Musk, who also runs SpaceX and owns social media company X, influence over federal agencies’ budgets, staffing and the ability to push for the elimination of inconvenient regulations. Musk said during a Tesla earnings call in October that he intended to use his sway with Trump to establish a “federal approval process for autonomous vehicles.”

While Tesla still doesn’t produce robotaxis or operate driverless ride-hailing services, its major domestic competitor Waymo on Wednesday said it conducted over 4 million paid robotaxi trips in 2024 as it scaled its commercial operations in the U.S.

“Tesla is the only Elon Musk company that is publicly traded and it has often served as a proxy for an investment in Musk himself,” the Barclays analysts wrote. “This value has understandably increased, but this further exacerbates the already-high key man risk in Tesla stock, in our view.”

On Wednesday, a Quinnipiac poll found 53% of voters in the U.S. do not approve of Musk “playing a prominent role in the Trump administration.” The split was massive across party and gender lines — only 31% of women surveyed said they approved of Musk taking a big role in the next administration, and only 5% of Democrats approved.

Musk has also complained in recent days that the SEC has issued a “settlement demand” tied to his sale of Tesla shares in 2022 as he was pursuing the purchase of Twitter, now known as X.

A spokesperson for the SEC declined to discuss the matter, telling CNBC that the agency conducts probes “on a confidential basis to preserve the integrity of its investigative process.”

Tesla is due to report its fourth-quarter and year-end vehicle deliveries in January. Without a major new vehicle added to its lineup since Cybertruck deliveries began in November 2023, Tesla has been working to drive sales of its EVs with an array of incentives, like 0% financing.

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