Tesla’s stock price skyrocketed to $420 per share, a 7.5% intraday surge, following the company’s announcement of its next-gen ‘AI5/AI6’ chips for its Dojo supercomputer platform and a potential robotaxi fleet expansion. This announcement added approximately $90 billion to the company’s market capitalization during Tuesday’s trading. However, despite the excitement surrounding the AI announcements, Tesla’s core electric vehicle (EV) business is showing signs of trouble.
Dojo Hype Vs. Shaky Earnings
Analysts argue that Tesla’s valuation is increasingly tied to its autonomous and AI roadmap, with some predicting a major profitability inflection in 2025 if Full Self-Driving adoption accelerates. However, the latest quarter’s results sent mixed signals, with revenue meeting expectations but margins and earnings remaining under pressure.
- Revenue: Ahead of expectations
- Margins and earnings: Under pressure
The company’s valuation already assumes a flawless execution of its AI and autonomous ambitions, with a forward earnings multiple of 185X and a price/earnings-to-growth ratio of approximately 8.3X. This leaves little room for error, especially with the looming court fight over Elon Musk’s multibillion-dollar compensation package, which could have a significant impact on the company’s valuation.
Tesla EV Slump Undermines the Bull Case
The surge in Tesla’s stock price was largely driven by the AI announcement, but many investors overlooked the newly revealed cracks in demand for the company’s EVs. In Europe, sales dropped by nearly 48.5% in October, while in China, Tesla’s market share slid to multi-year lows as domestic brands gained ground. This slump in volume undercuts the scale that would make a robotaxi or full-self-drive future meaningful.
- European sales: Down 48.5% in October
- Chinese market share: Slid to multi-year lows
If Tesla cannot stabilize demand for its cars, the AI narrative becomes little more than market theater, impressive on the surface but hollow underneath.
Up Next — Real Execution, Or Fading Hype?
For Tesla bulls, the next few quarters are crucial. Investors will be watching for:
- Revenue beats
- Actual improvements in EV sales
- Margin stability
- Regulatory green lights for autonomous features
Unless the company delivers real growth under the hood, the current AI-fueled jump might end up as just another short-lived rally, rather than a foundation for longer-term gains. The next few quarters will be make-or-break for Tesla, and investors will be closely monitoring the company’s progress.