Elon Musk’s $1 Trillion Tesla Pay Package Fuels 3.64% Stock Rally

On 5 September 2025, Tesla Inc. drew worldwide attention with an outrageous $1 trillion compensation package that was offered to the CEO, Elon Musk, which was disclosed in a securities filing.

This bold proposal aims to ensure Musk’s leadership until 2035, fixing his compensation on Tesla attaining an unbelievable market value of $ 8.5 trillion and achieving blazing operational milestones.

The news led to a 3.64 per cent rise in Tesla stock as of September 8, 2025, as stock analysts were excited but also had doubts about the viability of the plan. With Tesla shifting its focus from electric vehicles to artificial intelligence, robotics, and self-driving technology, the package highlights Musk as a key leader, even as it sparks debates about governance and his political engagements.

Unpacking the $1 Trillion Compensation Plan

The package that is being put forward will give Musk as many as 423.7 million shares, approximately 12 per cent of the outstanding stock of Tesla, worth as much as 148.7 billion at present prices, but which could be worth as much as 1 trillion upon the completion of all targets.

The award is a minimum of 12 tranches and is all performance-based with no guaranteed salary or bonuses. Musk will have to take Tesla’s market cap to the very high levels of 2 trillion dollars (almost twice its present 1.1 trillion) to earn shares, and additional tranches will be added according to the increasing valuation up to 8.5 trillion and operating profits of 400 billion, 20 times higher than Tesla’s records.

The most critical operational objectives are to deliver 20 million vehicles in the cumulative mode, 10 million active Full Self-Driving (FSD) subscriptions, 1 million humanoid robots, and 1 million robotaxis in service.

This would be a controversial move, following a 2018 Delaware court ruling that nullified a $56 billion package to Musk on grounds of unfairness. However, in 2025, an interim $29 billion award was reinstated. The new plan will also grant Musk the right to vote immediately on unearned shares, effectively entrenching his rule, particularly after he pushed for 25 per cent voting power.

Why Tesla’s Board Backs Musk

The package is justified by Tesla’s board, headed by Robyn Denholm and Kathleen Wilson-Thompson, as necessary to keep Musk in the critical transition to AI and robotics with his unique leadership.

The other projects by Musk, which include SpaceX, xAI, Neuralink, and X, have raised concerns about divided attention, although Musk himself has alluded to stepping aside without additional remuneration and control.

The plan is considered by the board to be low risk: in the event of accomplishing the targets, shareholders will receive a substantial profit; in other cases, Musk will receive nothing. Another requirement of the package is that Musk will have to create a leadership succession system to release the remaining 70 million shares as a long-term leadership issue.

Ambitious Milestones and Scepticism

The milestones of the plan are historical. The market value of 2 trillion is disheartening, and the 8.5 trillion target is higher than the market value of any company in history. Operationally, Tesla will have to increase the scale of vehicle deliveries, fulfil 10 million FSD subscriptions, and deploy 1 million Optimus robots and robotaxis.

The optimistic statements of Musk, such as robots contributing 80 per cent of Tesla’s worth, are subject to question due to his record of unfulfilled promises, such as full autonomy since 2014. A special committee will manage vesting to resolve the criticism of the past governance, but critics such as investor Ross Gerber term the plan as even more absurd since Musk fears losing control of his 13 per cent stake.

Investor and Market Reactions

The 3.64 per cent increase in the stock is positive, and its proponents, such as Gene Munster of Deepwater Asset Management, believe the package shifts Musk back to the potential of AI and robotics of Tesla.

The success of Musk is perceived to have a shared benefit among shareholders, who are likely to endorse the plan at the November 6, 2025, meeting. Nonetheless, critics such as analyst Gordon Johnson decry Musk as a manipulator because of unattained objectives and political diversions.

Musk has contributed $250 million to a super PAC and has been involved with the Department of Government Efficiency, which has turned off some customers. As a result, Tesla sales in California decreased by 18 per cent in early 2025. These tensions are marked by a shareholder proposal of political neutrality, which was opposed by the board.

Stock Implications and Challenges

The high valuation of Tesla, at 83 times EBITDA, is based on Musk’s vision, but EV demand and competition in China are posing threats.

The package had the potential to galvanise innovation, but failure to deliver would undermine investor confidence, particularly in the backdrop of a multi-quarter sales decline.

Wolfe Research reports an uncertain backdrop; however, the market’s initial surge in the stock indicates that it believes in Musk and his ability to overcome the odds.

Broader Context: FSD and Customer Trust

At the same time, Tesla revised the description of FSD and acknowledged that it is not entirely autonomous, needs oversight, which addressed the lawsuits concerning safety issues and misstatements.

This change, announced on September 6, 2025, may impact customer trust and the target of 10 million subscriptions to the FSD, as dissatisfaction remains.

Looking Ahead

The 1 trillion gamble Tesla bets on Musk is the gamble to establish its tech lead. Corporate valuations might be redefined by success, but the threats, governance issues, and execution barriers are high.

With the shareholder vote looming over them, Tesla stock and the legacy of Musk hang in the balance as the market scrutinises them over whether they will follow up on all these daring commitments.