Tesla Motors (TSLA) extended its rally on Monday, surging as much as 4.9% intraday and potentially closing at an all-time high for the first time since December 2024—a stark contrast to growing market concerns over its soaring valuation.
The electric vehicle (EV) maker's recovery has been turbulent, with its stock more than doubling since hitting a low in early April amid a broader market slump triggered by former U.S. President Trump's tariff offensive. During early New York trading, Tesla shares peaked at $481.37. If gains hold through the session, the stock will close at a record high, surpassing its previous peak close of $479.86 on December 17 last year.
"Investors should remember that while solid fundamentals remain important, they are no longer the primary driver," said Matt Britzman, senior equity analyst at Hargreaves Lansdown. "Tesla's volatility hinges on both fundamentals and market sentiment, with its core business taking a backseat to the AI narrative fueling its trillion-dollar valuation."
Tesla's disappointing Q3 earnings in October, where rising costs offset record vehicle deliveries, dampened investor enthusiasm. The delivery surge was driven by consumers rushing to claim federal EV tax credits before their expiration in late September.
Record deliveries masked Tesla's deteriorating fundamentals this year: weakening global demand, declining profit expectations, and heightened regulatory scrutiny. Analysts now anticipate a significant slowdown in future sales, a view echoed by industry leaders. Ford CEO Jim Farley warned that EV market share in the U.S. could plummet from ~10% to 5% as Trump's policies favor combustion vehicles. Prominent investor Michael Burry also criticized Tesla's "overvalued" stock in a recent Substack post.
Earlier this year, Musk's political maneuvers sparked concerns about his waning focus on Tesla. The company's attempts to boost sales with lower-priced variants of popular models faced skepticism. These worries, combined with Trump's tariffs and Musk's public rift with the president, sent Tesla shares tumbling 50% from their December peak by April.
Since then, Tesla's remarkable rebound has reaffirmed Musk's ability to sway investor sentiment. His push to transform Tesla into a robotics and AI giant has drawn both praise as visionary and criticism as a distraction from its core business.
This pivot coincides with an AI frenzy propelling stocks from Alphabet Inc. to Oracle to record highs. Investors betting on Musk's world-changing promises may soon get another opportunity—SpaceX's planned 2025 IPO.
Traders are now buying into Musk's narrative, increasingly bullish on Tesla's AI prospects. In November, shareholders reinforced their faith in his vision by approving his $1 trillion compensation package, ensuring his continued leadership.
Bolstered by its potential dominance in automation, Tesla has received multiple rating and price target upgrades. Wedbush analyst Dan Ives raised his target from $500 to $600 on September 26, calling the company a potential "game-changer" in AI.
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