Tesla Inc (NASDAQ:TSLA) rocketed to $420 a share on Wednesday — a 7.5% intraday surge sparked by a promise, not a delivery. The buzz around next-gen ‘AI5/AI6’ chips for its Dojo supercomputer platform and a robotaxi fleet that might double by year-end, added roughly $90 billion in market cap during day trading on Tuesday. But while the sentiment rally is real, Tesla's core business is flashing trouble signs.
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Dojo Hype Vs. Shaky Earnings
Analysts at Wedbush have argued that Tesla's valuation upside is increasingly tied to its autonomous and AI roadmap, recently lifting their price target to $600 a share and framing robotaxi and Dojo progress as key catalysts rather than traditional vehicle growth. They point to the potential for a major profitability inflection in 2025 if Full Self-Driving adoption accelerates — but the latest quarter still sent mixed signals: revenue came in ahead of expectations, yet margins and earnings remained under pressure.
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And the looming overhang from the court fight over Elon Musk's multibillion-dollar compensation package — which could carry an impact reaching into the tens of billions if the ruling goes against Tesla — leaves little room for error on a valuation already stretched by future expectations rather than current fundamentals.
At 185X forward earnings and roughly 8.3X price/earnings-to-growth, per Benzinga Pro data, Tesla's valuation already assumes a flawless execution of its AI and autonomous ambitions. That may be too steep a price to pay if the core EV business keeps weakening.
Tesla EV Slump Undermines The Bull Case
Because the surge came on AI dreams, many investors overlooked newly revealed cracks in demand. In Europe, sales dropped nearly 48.5% for October, fueled by waning EV incentives and stronger competition. In China, Tesla's market share slid to multi-year lows as domestic brands gained ground. The slump in volume undercuts the very scale that would make a robotaxi or full-self-drive future meaningful.
If Tesla can't stabilize demand for its cars, then the AI narrative becomes little more than market theater — impressive on the surface, hollow underneath.
Up Next — Real Execution, Or Fading Hype?
For Tesla bulls, the next few quarters are make-or-break. Investors will be watching not just revenue beats but actual improvements in EV sales, margin stability, and regulatory green lights for autonomous features.
Because unless the company delivers real growth under the hood, today's AI-fueled jump might end up as just another short-lived rally — not a foundation for longer-term gains.
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Image: © John Locher, AP via Imagn
