Tesla stock is falling because Elon Musk’s stock is falling

Unlock the Editor’s Digest at no cost

The post-election Trump bump has come and gone. Along the way in which, no US stock was more powerfully buffeted than Tesla. Elon Musk’s carmaker had, at one point in December, gained $733bn in market capitalisation because the US election, greater than some other company within the S&P 500. Its 54 per cent drop since then can be the best fall amongst index members. Musk is the explanation, in each directions.

Even before Donald Trump won the presidential vote and hired the world’s richest man as his efficiency tsar, Tesla — then value about $800bn — was valued more like a moonshot than a carmaker. The corporate was trading at around 80 times expected earnings for 2025, putting it in the highest 3 per cent of US-listed corporations value greater than $1bn, in response to Capital IQ data. The median price-to-earnings multiple on the time was 15 times.

Not even probably the most far-fetched automotive estimates justified that. Before the election, Lex calculated that Tesla’s automobile business was value around $240bn, based on a generous estimate of 6mn vehicles by 2030. The remaining $560bn or so looked like a heady cocktail of hope about future projects, from self-driving taxis to humanoid robots.

Notwithstanding Trump’s pledge to purchase a brand recent Tesla, some things look worse for the carmaker now than in November. Sales have plunged in Europe; Tesla has faced protests and vandalism. Production in China, an enormous market, has slumped. And while Musk claims the death of EV credits within the US advantages Tesla by harming his competitors, that continues to be an untested theory.

But remember: Tesla isn’t valued like a automobile company, which suggests the autumn in its valuation — including a vicious 15 per cent drop on Monday — is just vaguely about automotives. As an alternative, the corporate’s massive gain because the election and subsequent fall reflects investors’ shifting views on the plausibility of his various moonshots.

On that front, Musk’s value to Tesla has probably gone from overvalued to oversold. In any case, the likelihood of Tesla eventually reshaping the world of autonomous mobility probably hasn’t shifted much. True, Musk has less time for Tesla nowadays, but his plate was piled high with other ventures long before he pitched up on the White House.

As for humanoid robots, those too remain as likely — or not — as ever. Musk has said the descendants of his prototype droid Optimus might be “the most important product ever of any kind”. Hubris perhaps, but the longer term is undeniably going to be robotic. Bank of America analysts just doubled their estimate of world humanoid shipments, to 10mn by 2035.

The difficulty is, the more the Tesla chief guarantees, the less plausible he sounds — especially as tech valuations slide. For instance, Musk told analysts as recently as January that his carmaker might be value greater than Apple, Microsoft, Nvidia, Amazon and Alphabet combined, currently akin to $13tn. As of Monday, it was just 5 per cent of the way in which there. Hype took Tesla briefly to $1.5tn; only credibility will get it back there.