Tesla shares fell during premarket trading Friday after UBS downgraded the electric carmaker, citing concerns that its stock had risen too much on speculation regarding artificial intelligence rather than its core auto business. The drop came after a Bloomberg report revealed the delayed unveiling of Elon Musk’s robotaxi service, causing Tesla’s longest streak of consecutive gains to come to an end with a more than 8% drop in market close on Thursday.
Analysts at UBS believe Tesla’s stock price has become caught up in the AI hype and could be vulnerable if market enthusiasm for AI diminishes. While Tesla has grand plans for AI applications like autonomous cars and robotaxis, the analysts warned that these growth opportunities may take a longer time to materialize, if at all. They acknowledged Tesla’s progress in developing fully self-driving cars but noted that many of its other AI initiatives are still in the research and development stage.
The AI boom has led to a surge in stock value for many companies, raising concerns that the sector may be overheated and unsustainable. Big Tech companies like Apple, Microsoft, Alphabet, Amazon, and Meta have heavily invested in AI for their future plans, leading to partnerships, acquisitions, and investments in smaller AI players and startups. The recent selloff in Big Tech stocks, including Tesla, resulted in a collective loss of nearly $600 billion in market cap for the Magnificent Seven companies, marking the second-biggest one-day loss on record.
Elon Musk, the richest person in the world with an estimated net worth of $245.7 billion, saw a significant decrease in his fortune after Tesla’s stock price fell. Much of Musk’s wealth is tied to Tesla and other companies he leads, such as SpaceX, The Boring Co., Neuralink, and xAI. Musk has faced lawsuits from Tesla investors over his involvement with xAI, his new AI startup, as well as controversy surrounding his acquisition of the social media platform X in 2022.
Investors and analysts will be closely watching Tesla’s future developments in AI, including the unveiling of its robotaxi program in October. The company’s stock performance will depend on its ability to deliver on its AI initiatives and transition from research and development to commercial applications. With the AI sector facing increasing scrutiny and volatility, Tesla will need to navigate these challenges to sustain its market value and investor confidence.
