How Bernard Arnault (LVMH) became richer than Elon Musk (Tesla), and why he could remain so

How Bernard Arnault (LVMH) became richer than Elon Musk (Tesla), and why he could remain so

While Tesla tumbled on the stock market, Elon Musk recently had to give his crown of richest man in the world to Bernard Arnault and his family, reference shareholder of LVMH. According to the Forbes ranking of the fortunes of the planet’s billionaires, the Arnault family “weighs” at the time these lines are written nearly 188 billion dollars (178 billion euros!), a jackpot that exceeds a “short” head of the fortune ($181 billion) of Elon Musk, a serial entrepreneur known for his many successes (Paypal, SpaceX, Tesla) and his fertile imagination (Hyperloop, anti-traffic tunnels, etc.), but who has lost a whopping $100 billion in just a few months.

How to explain this upheaval at the top of the ranking of great fortunes? “Wealthy Elon Musk has had a year of misfortune. His passion for the blue bird (Twitter, editor’s note) and his obsession with freedom of expression in short would be at the origin. Reuters notes that Tesla has lost 47% on the stock market since the digital agitator launched its offer on Twitter,” notes Fidelity. However, Elon Musk remains a reference shareholder of Tesla, which has also suffered from difficulties in China. Tesla “suffered the consequences of health restrictions in China this year, where it also had to agree to price reductions. Last week, fears of a drop in production at its Gigafactory in Shanghai weighed on the stock,” observes Fidelity.

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Tesla is also suffering from higher commodity prices and fears of growing competition in the electric car segment, not to mention the surge in long-term rates (particularly penalizing for technology and growth stocks, a list which includes the Tesla stock).

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Conversely, LVMH is benefiting from the impressive resistance of the luxury sector to the pressures on the economy. Luxury “is sitting on comfortable margins and with indisputable pricing power, does not seem to be worried by the erosion of the economic situation. With little regard for the size of the barcode, customers in the sector don’t care about inflation or their first Hermès square. Enough arguments to encourage investors to reupholster the inside of their wallets with Burberry or Vuitton or Gucci monograms. That’s for sure, whatever the economic weather – a fortiori the one that prevails today – Dior, they love it!”, quips Fidelity.

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Moreover, if LVMH, as a growth stock, has been affected (like Tesla) by the surge in long-term rates, it should now gradually benefit from the announced end of China’s zero-Covid policy. Indeed, the French luxury giants are very dependent on the Chinese consumer. And the Middle Kingdom could even represent half of the luxury market by 2025, according to a study by the consulting firm Bain. The luxury sector is driven by powerful structural drivers, such as the enrichment of the middle classes in emerging countries (including China). Under these conditions, while many observers consider Tesla’s share still largely overvalued, Bernard Arnault could remain (beyond the current volatility of stock market prices) the richest man in the world, in the medium term.