The valuation of Tesla has sparked intense debate, with some questioning whether the company’s current market cap is justified. Prominent pseudonymous crypto trader DonAlt has challenged Tesla bulls to provide a reason for the company’s $1.3 trillion valuation. In this article, we will delve into the bear and bull cases, examining the factors that contribute to Tesla’s valuation.
The Bear Case
The bear case against Tesla is multifaceted. DonAlt has questioned the company’s AI capabilities, car sales, and Twitter’s success. The auto business has experienced a decline in revenue, with Q4 2025 revenue falling to $94.8 billion from $97.7 billion in 2024. This marks the first annual decline in company history. Net income has also plummeted, with a 61% year-over-year decline in Q4 and a 46% decline for the full year.
- Full-year deliveries of 1.636 million fell roughly 9% from 2024, marking two consecutive years of declining deliveries.
- European sales are struggling, with Tesla’s France sales falling 42% in January to just 661 cars.
- Norway registrations dropped almost 90% over the same period, attributed to Elon Musk’s political involvement and competition from BYD and Stellantis.
The Bull Case: AI and Robots
Tesla positions itself as a “physical AI company” rather than an automaker. The company is set to begin production of the Cybercab robotaxi in April, priced at around $25,000. However, Elon Musk has warned that early production will be “agonizingly slow” due to the newness of the technology. Investor Gary Black has argued that Tesla stock could reach $500 if the company demonstrates “hundreds” of unsupervised robotaxis operating in Austin, proving the technology can scale globally.
- However, Black acknowledged that the bull narrative that only Tesla could solve unsupervised autonomy “has fallen apart,” citing progress from Waymo, Baidu’s Apollo Go, and Nvidia’s technology.
- The Optimus robot remains speculative, with Musk claiming it could generate over $10 trillion in long-term revenue.
The SpaceX Angle
The SpaceX-xAI merger valued SpaceX at $1 trillion. Tesla invested $2 billion in xAI, meaning shareholders now have an indirect stake. Some investors see TSLA as a backdoor to SpaceX IPO access, potentially propping up the stock.
- Wedbush has said there’s a “growing chance” Tesla merges into SpaceX/xAI within 12-18 months.
TSLA’s Technical Breakdown
TSLA is currently down 0.5%, trading below all major EMAs except the 200 EMA at $394.15. The Supertrend at $444.54 remains bearish. The stock sits in the 0.618 Fibonacci retracement zone ($383-$429), a critical support area.
- Immediate support is $394 at the 200 EMA, followed by $383.
- Breaking below $383 triggers selling toward $347. For reversal, TSLA needs to reclaim $430, then break above the Supertrend at $444.54.