Tesla (TSLA) fell by nearly 50% earlier this year, giving up post-election gains amid a market-wide decline and a spat between President Donald Trump and CEO Elon Musk. It has been making a comeback in the past few months and is up by 3.5% year to date, although it remains nearly 12% off its YTD highs and is underperforming the S&P 500 Index ($SPX).
The comeback can be attributed to Musk making a pivot to artificial intelligence.
Namely, he has been placing a greater emphasis on Optimus robots and robotaxis. The latter has largely been a disappointment, with competition from Uber (UBER) and Waymo, but shareholders are still hopeful that Optimus can carry Tesla to fresh highs.
Musk now seems to be putting the spotlight on another one of Tesla’s AI offerings. He posted on X saying, “Most people don’t know that Tesla has had an advanced AI chip and board engineering team for many years.” Musk pointed out that Tesla has “designed and deployed several million AI chips” for data centers and believes they will “…profoundly change the world in positive ways, saving millions of lives due to safer driving and providing advanced medical care to all people via Optimus.”
Investors have always paid a premium for TSLA stock, valuing it much more highly than any other automaker. This has mostly been because investors thought electric vehicles were the future, with Tesla spearheading EV development and sales. The company was also posting stellar growth becoming increasingly profitable.
The boom for Tesla’s EVs did not last long, as growth ground to a halt. Vehicle unit sales declined from 1.8 million in 2023 to 1.79 million in 2024, a very sharp change in momentum, considering vehicle unit sales were 1.31 million in 2022. Revenue has been similarly constrained, though Q3 showed an 12% year-over-year increase. The caveat is that it came with a 37% decline in earnings per share.
Paradoxically, though, TSLA stock has not only managed to hold on to its earnings multiple, but actually expanded it. The stock has kept up a long-term uptrend despite falling profits and very slow growth for a business trading at over 288 times trailing earnings.
