Tesla’s Stock Plummets Nearly 50% in Three Months—Is Elon Musk’s Empire Crumbling or Still Overvalued?
Tesla’s stock has taken a nosedive, losing nearly half its value in just three months. Despite the sharp decline, a fierce debate rages on among investors: Is Elon Musk’s electric vehicle (EV) empire still wildly overpriced?
Tesla’s Market Value in Freefall—Yet Still Sky-High
Since peaking at a staggering $1.5 trillion on December 17, Tesla’s market capitalization has plunged 45%, wiping out most of its gains following CEO Elon Musk’s financial backing of Donald Trump’s election victory.
Yet, Tesla (TSLA.O) still commands a valuation that dwarfs the world’s largest automotive and tech giants. Why? Because many investors continue to buy into Musk’s vision of Tesla not as an automaker, but as an artificial intelligence (AI) powerhouse on the brink of revolutionizing the industry with robotaxis and humanoid robots.
Tesla’s True Worth: More Hype Than Reality?
According to a Reuters analysis of over a dozen investment firm reports, Tesla’s EV business makes up the majority of its revenue—but only 25% of its stock-market value. The bulk of its worth is tied to speculative hopes for self-driving technology that Musk has promised since 2016—yet has failed to deliver year after year.
Tesla’s steep stock decline is fueled by multiple factors:
- Declining vehicle sales and profits
- Backlash over Musk’s political involvement, including mass firings of U.S. government workers as a senior Trump advisor
- Investor concerns that Musk’s political distractions are hurting Tesla’s core business
Despite these challenges, Tesla’s market cap remains $65 billion higher since Trump’s election, a sum greater than General Motors’ (GM.N) entire valuation.
Can Tesla Justify Its Sky-High Valuation?
Tesla’s $845 billion total market value still exceeds the combined worth of the next nine most valuable automakers, which collectively sold 44 million cars last year—compared to Tesla’s 1.8 million.
Many investors continue to bet on Musk’s promises of a Tesla-dominated future rather than the company’s current financial realities. However, the widening gap between expectations and actual performance has raised red flags.
JPMorgan analyst Ryan Brinkman warned in January:
“For how much longer can the stock remain divorced from the fundamentals?”
Even as Tesla struggles with falling profits, Musk’s messaging remains bullish. In July, he told investors who doubt Tesla’s self-driving future to “sell their stock.”
From EV Leader to Robotaxi Speculation
Tesla’s stock previously peaked at $1.2 trillion in 2021, following the massive success of the Model 3 and Model Y, which proved that EVs could be produced profitably at scale.
But in April 2023, Tesla abruptly scrapped plans for a $25,000 Model 2, a move that many investors saw as a major red flag. Instead, Musk shifted focus to robotaxis, claiming they would replace traditional car ownership.
That pivot boosted Tesla shares 71% between April and November, despite declining EV sales. However, the post-election Tesla rally—fueled by hopes of Trump removing regulatory hurdles for robotaxis—may now be wearing off.
Will Trump’s Win Supercharge Tesla’s Future—or Backfire?
Musk’s $250 million backing of Trump positioned him as a top advisor on government staff cuts and deregulation. Optimistic investors believe Trump will fast-track Tesla’s robotaxi expansion.
But does Tesla really need a regulatory boost? Many U.S. states already have minimal oversight on autonomous vehicles. In Texas—where Musk plans to launch ride-hailing robotaxis by June—state laws prevent cities from regulating them.
Still, skepticism remains. Investment strategist Gordon Johnson argues:
“There’s absolutely nothing stopping Musk from deploying self-driving tech right now—except that it doesn’t work. If he released it tomorrow, cars would be crashing across America.”
Tesla has faced lawsuits and federal investigations over accidents involving Autopilot and Full Self-Driving. While the company warns drivers that the systems don’t make Tesla vehicles fully autonomous, Musk insists that Tesla’s AI will soon outperform human drivers.
Tesla Faces EV Demand Collapse and Rising Competition
Tesla’s core business is faltering. The only new model launched since 2020—the Cybertruck—sold just 38,965 units last year, well below Musk’s initial 250,000-unit production target for 2025.
Meanwhile, Tesla has slashed prices on its aging Model 3 and Model Y amid:
- Slowing EV demand worldwide
- Rising competition, especially from China, where EVs start at under $10,000
- Declining European sales, partially due to Musk’s political alignment with far-right movements
Could Trump’s EV Opposition Hurt Tesla?
Ironically, Trump—whom Musk helped elect—has called for ending EV subsidies, which have added billions to Tesla’s bottom line. Musk has downplayed the potential impact, claiming legacy automakers will suffer more from subsidy cuts.
Yet, when Tesla’s annual operating profit dropped 20% in January, analysts on the earnings call ignored financial concerns—instead focusing on Musk’s robotaxi promises. The stock rose 3% the next day, underscoring how hype still fuels Tesla’s valuation.
Tesla’s Valuation Breakdown: Reality vs. Fantasy?
Tesla still trades at sky-high forward price-to-earnings ratios, a metric investors use to assess whether a stock is fairly valued or overpriced.
Investment firms estimate that Tesla’s value is split as follows:
- Truist Securities: 9% from car sales, 34% from robots, 17% from robotaxis
- Bank of America: 50% from robotaxis, 28% from self-driving software
- Morgan Stanley: 21% from robotaxis, 39% from AI subscriptions
Even Ark Investment Management, one of Tesla’s most bullish investors, projects Tesla stock will hit $2,600 by 2029—but only if robotaxis account for 88% of its value. That’s based on projections that Tesla could generate $760 billion annually from robotaxis, more than Walmart’s total revenue today.
Reality Check: Does Tesla’s AI Actually Work?
Musk’s “Cybercab” concept, an autonomous vehicle without steering wheels or pedals, is slated for 2026 production. However, state regulations—not federal policies—govern robotaxi operations, limiting Trump’s influence over the rollout.
Tesla’s biggest competitor, Waymo (owned by Alphabet), already operates hundreds of fully driverless taxis in Los Angeles and Phoenix. Unlike Tesla, Waymo uses radar and lidar technology for added safety.
Many experts argue Tesla’s camera-only approach to self-driving is flawed. Investment manager Mark Spiegel, who is betting against Tesla, bluntly stated:
“Tesla’s robotaxi tech does not work safely—and never will without radar and lidar.”
Adding pressure, China’s BYD recently announced plans to offer advanced driver-assistance tech for free, undercutting Tesla’s $8,000 Full Self-Driving package.
GLJ Research analyst Gordon Johnson summed up the growing skepticism:
“BYD is telling you there’s no value in self-driving tech. They’re giving it away for free.”
Bottom Line: Is Tesla’s Stock Set for More Pain?
With Tesla’s core EV business slowing, Musk is betting big on robotaxis—but can he deliver? Investors seem divided: Is Tesla a true AI giant, or a speculative bubble?
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