Tesla shares fell during premarket trading Friday after UBS downgraded the electric carmaker over fears AI hype had inflated its stock value, the latest blow for the company after a nearly two-week rally unraveled yesterday following reports the anticipated unveiling of Elon Musk’s robotaxi service would be postponed.
Tesla shares fell during premarket trading on Friday.
Tesla shares were down 2% to $236.26 during premarket trading Friday morning.
The drop comes after analysts at Swiss bank UBS downgraded Tesla’s rating from neutral to sell.
Analysts cited concerns Tesla stock had risen “too much, too soon” on a wave of booming interest and optimism for artificial intelligence rather than enthusiasm for its core auto business.
“We believe TSLA stock price has gotten caught up in the AI trade/phenomenon,” the analysts wrote, warning that its stock price was vulnerable “if market enthusiasm for AI diminishes.”
While Elon Musk and Tesla have grand plans for utilizing AI, including autonomous cars and robotaxis, humanoid Optimus robots and developing its own AI systems and hardware, the analysts said there is a risk these growth opportunities would only manifest over a “longer time horizon,” if at all.
While conceding that Tesla had made impressive progress towards its mission to develop fully self-driving cars, the company’s other AI “initiatives are purely R&D (research and development),” the analysts said.
Friday’s slump comes off the back of a precipitous drop of more than 8% by market close on Thursday. The fall, one of Tesla’s worst single-day drops in months, pulled the brakes on the carmaker’s longest streak of consecutive gains since last May, an 11-day rally that added nearly $260 billion to its market capitalization. The reversal in fortunes followed a Bloomberg report that the carmaker would be delaying the anticipated unveiling of its robotaxi program by roughly two months to allow teams to build more prototypes. The project, which Tesla CEO Musk has hyped as a central element to the company’s future for years, will now be revealed in October, rather than early August.
The AI boom has propelled the stock value of many companies skywards in recent months. The UBS analysts join an increasing chorus warning that the sector may be getting too hot and its rapid growth unsustainable. Some suggest the AI bubble may soon deflate or even pop. Big Tech stocks for giants like Apple, Microsoft, Alphabet, Amazon and Meta have all invested heavily into AI and made the technology key for their future plans, with many partnering with, acquiring or investing heavily in smaller players and startups like ChatGPT maker OpenAI, Perplexity, Claude maker Anthropic and Inflection for AI talent and products. Growing fears have sparked a selloff among Big Tech stocks and the Magnificent Seven—Microsoft, Apple, Nvidia, Alphabet, Amazon, Meta and Tesla—collectively lost nearly $600 billion in market cap Thursday, the group’s second-biggest one-day loss on record.
Musk is the richest person in the world with an estimated net worth of $245.7 billion. Much of Musk’s fortune is tied to the companies he cofounded and leads, notably carmaker Tesla, and his fortune fell by around $11 billion, 5%, on Thursday after the firm’s stock price fell. Musk also cofounded and leads rocket firm SpaceX, tunneling company The Boring Co., brain implant company Neuralink and new AI startup xAI, which Tesla investors have sued him over. He also owns social media platform X, which he controversially acquired in 2022.
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