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Retail investors swiftly took advantage of a sudden clash between U.S. President Donald Trump and Tesla CEO Elon Musk, scooping up Tesla shares as they dipped significantly during the feud. On Thursday, Trump issued threats to withdraw government contracts with Musk's companies, a notable move as the relationship between the two influential figures soured publicly over conflicting views on the president's tax-cut bill.

Tesla’s stock experienced a significant drop of 14.3% on Thursday, marking it as the 11th largest daily decline since the company went public in June 2010. However, Friday saw a resurgence with the stock rising 5.6% to $299 by mid-afternoon. The influence of retail investors in this rally, although significant, remains unclear.

According to Vanda Research, self-directed individual investors purchased a net $201.3 million of Tesla stock on Thursday, with the total buying and selling activity reaching $2.6 billion. This activity positioned Tesla as the second most actively purchased stock by retail investors on that day. Marco Iachini, senior vice president of research at Vanda, noted that Tesla has been a long-time favorite for this group, making any significant drop a signal to buy for many.

The fervor wasn't limited to direct stock purchases. Retail investors also funneled considerable money into leveraged exchange-traded funds (ETFs) for an amplified bullish bet on Tesla. The Direxion Daily 2x Bull ETF saw net buying of $41.5 million on Thursday, as per Vanda data.

In the options market, which is popular among retail traders handling Tesla stock, there were no major signs of panic. Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, remarked that increased volatility presented a trading opportunity, with some traders capitalizing by selling put options. Tesla's 30-day implied volatility rose to a six-week high of 77 on Thursday, remaining below past peaks, and fell further to 68 when shares climbed to $299.14 on Friday morning.

Interactive Brokers' chief strategist Steve Sosnick indicated that current volatility levels had not reached concerning thresholds. Meanwhile, social media sentiment on platforms like Reddit and X, which attract self-directed investors, continued to show a bullish attitude towards Tesla, with the dominant sentiment being to "buy the dip," according to Iachini's analysis.

Following a 90% surge in Tesla shares in the six weeks after the November 5 election, the stock has seen a significant 37% decline since peaking on December 17.