It was the week when Elon Musk soared past Bill Gates to become the world's second richest person, as Tesla's value topped $500bn.

On Tech Tent, we ask just why investors think the electric car company is worth so much more than it was a year ago.

At the beginning of 2020, Tesla was valued by the stock market at around $80bn - and even then, sceptics thought that was a high price for a business that was barely profitable.

Tech Tent: Is Tesla really worth $500 billion? https://t.co/XyqThYecnb

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Throughout the year its shares have soared, and its valuation climbed above $500bn on the news that the business was going to be included in the S&P 500 index of leading companies.

Just to put that into context: Tesla is now worth more than Toyota, Volkswagen, Hyundai, GM and Ford put together.

I've done some back-of-the-envelope calculations and those businesses, some of which are undoubtedly ailing, made a combined profit of more than $50bn last year.

This year, Tesla is on course to make something like $1bn. So to believe the current valuation, surely you have to have some confidence that its technology and its market dominance will deliver a 50-fold increase in profits over the not too distant future?

"You're being too rational!" Passion Capital's Eileen Burbidge told me when I put it to her that Tesla's sky-high share price simply didn't add up.

"All it means is that the people who are buying the stock at this price believe they're going to be able to sell it at a higher price."

Eileen's work as a venture capitalist is all about putting a value on companies which are at a much earlier stage than Tesla - and she tells Tech Tent that this is often a similarly irrational process, dependent on the mood in the wider market, and not just the qualities of individual businesses.

Tesla's many fans will rightly point out that it has sent the automotive industry in a new direction, has unique battery technology with many other applications, and has a visionary leader.

But that was all true at the beginning of 2020 when it was worth a mere $80bn.