Tesla's stock price continued its gains on Monday, rising 4.9% during the session, and is expected to close at a record high for the first time since December 2024. This is in sharp contrast to the market's growing concerns about its soaring valuation. The electric car maker has had a rocky road to recovery, with its shares more than doubling since hitting lows in early April amid a stock market rout triggered by U.S. President Donald Trump's tariff offensive.
In early trading in New York, the stock hit a high of $481.37. If the gains can be maintained until the end of the regular trading session, the stock price will close at a new record high. Its previous highest closing record was $479.86 on December 17 last year.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said, "Investors should keep in mind that while solid business fundamentals are still important, they are not the main driver. Volatility in Tesla's stock price depends on both fundamentals and market sentiment, and its core business has taken a backseat to the AI story that supports its trillion-dollar valuation."
Tesla's third-quarter earnings in October disappointed investors, with rising costs offsetting record vehicle sales. The surge in sales comes as consumers rush to buy before the federal electric vehicle tax credit expires at the end of September.
Record sales belie a grim outlook for the electric car maker. Tesla's fundamentals have deteriorated sharply this year: weak global sales, declining profit expectations, and intensifying regulatory scrutiny.
Analysts now expect subsequent sales to slow significantly. Industry leaders agree with this prediction: Ford CEO Jim Farley pointed out that as Trump’s policies favor fuel vehicles, the share of electric vehicles in the U.S. market will plummet from about 10% to 5%. Meanwhile, prominent investor Michael Burry criticized the stock for being "overvalued" in a Substack article earlier this month.
Earlier this year, Musk's political moves stoked concerns that his enthusiasm for running the automaker was waning. The company's attempts to stimulate sales by launching lower-priced versions of popular models have been met with skepticism. These concerns, combined with Trump's tariff policy and Musk's public break with the president, have put pressure on the stock price, which has fallen 50% from its high in December last year as of April.
Since then, Tesla's stock price has staged a stunning reversal, once again confirming Musk's ability to drive investor sentiment. His push to transform the electric car maker into a robotics and artificial intelligence powerhouse has been seen by some as visionary and by others as a departure from its core business.
The strategic shift coincides with the artificial intelligence craze sweeping the market, driving a shift from Alphabet Inc. The stock prices of companies such as Oracle have hit new highs. Investors who believe in Musk's promise to change the world will have another opportunity to bet on his genius - SpaceX plans to go public next year.
Currently, traders are buying into Musk's narrative and are increasingly optimistic about Tesla's artificial intelligence layout. In November, Tesla investors demonstrated their trust in Musk's vision and their hope that he would remain at the helm by approving a trillion-dollar compensation package for the CEO.
Based on its potential to dominate the field of automation, the company has also received upgrade ratings and target price increases from multiple institutions. Wedbush analyst Dan Ives raised his Tesla target price from $500 to $600 on September 26, saying the company could become a "changemaker" in the field of artificial intelligence.