From high speed innovations to high stakes geopolitics, yet again Tesla has become the center stage in market drama. This week, the EV giant attempted to catch its breath after a series of declines, inflation fears, trade war rumblings, and Powell’s statement that seems to suddenly add more fuel to the fire. Despite all the drama, investors tend to wonder about the tech-powered future of Tesla and whether they have enough resilience to withstand the macroeconomic disaster or not.
Earlier today, in premarket trading for Thursday, Tesla shares increased by 1.6% to reach $245.54. It gained some ground after having fallen earlier by about 4.9% on Wednesday. The slight growth will ease some tension for investors after what has generally been a stormy period for the EV giant, as Tesla has loosened up its losing streak to 10 weeks out of the past 12, and is down to 4.2% so far this week alone.
Factors such as fading sales growth, increasing tension between trade countries, and raised scrutiny over CEO Elon Musk’s public statements have all taken a toll on the stock’s value or effectiveness. The analysts alsopointedout Musk’s negative presence in politics as another factor that has created publicity about Tesla’s headwinds.
Powell on Tariff-Driven Inflation Risks
Just this week, the Federal Reserve Chairman Jerome Powell has further escalated the already high stakes worries of the market. He warned that
“tariffs are highly likely to generate at least a temporary rise in inflation and that the inflationary effects could also be more persistent.”
The inflationary effect of tariffs to last longer than considered, fueled the investor fears. Some wider market measures were beginning to show indications of stability on Thursday morning, with futures on the S&P 500 and on the Dow Jones Up by 1% and 0.8%, respectively. However, there is still panic in the air.
Tesla’s troubles corresponded with a weakening of market sentiment in the wake of increasing trade tensions between the U.S and China. Nvidia’s share fell 6.9% on Wednesday, ultimately causing the Nasdaq composite down to 3.1%, after the White House barred the chipmaker from selling H20 chips to China. According to Wedbush analyst Dan Ives,
“The White House essentially blocked Nvidia from selling its key H20 chips to China,”
and in a CNBC appearance, he referred to the current tariff situation as an “economic armageddon”. If tariffs stayed the same with the current environment, the tech sector could see a decrease in demand anywhere from 15% to 20%. This indicates a growing concern that American tech companies, namely Tesla, may not be able to absorb these higher tariff costs and will most likely pass them on to consumers.
Analysts Argue over Tesla’s Vision
Amidst the current turmoil, a respectable number of investors stay positive regarding Tesla’s future, particularly in the company’s autonomous driving and artificial intelligence initiatives. JDP Capital Management expressed its confidence in the innovation of Tesla, with emphasis on the potential of the Full Self-Driving (FSD) software and the Optimus humanoid robot initiative.
According to the company investor letter Q4 2024, Tesla stock increased by 115% in just one year. This gain was large enough to surpass any benefits they got from purchasing the stock in June 2024 after it lost 30% of its value in the first part of that year. JDP believes that Tesla’s AI and robotics programs could one day be responsible for nearly 90% of the company’s overall valuation.
Tesla’s Optimus Robot Program
Tesla is designing and manufacturing all the components of the Optimus robot from scratch, intending to deploy the humanoid assistant in company facilities as of 2025. The initial production of the Optimus robot will likely stand about 10,000 units per year. The company also highlighted that for Optimus training, ten times the compute power used in training their autonomous car models will be required. The program is expected to bring over $10 trillion to the company, solidifying the company’s faith in AI robotics for the long run.
Still, there are quite a few skeptics. RBC Capital Markets analyst Tom Narayan cut his Tesla price target this week from $440 to $320, arguing that competition in FSD is intensifying. He also cut his subscription price forecast for Tesla’s FSD software from $100 to $50 a month and suggested that autonomous driving may be viewed as a commodity sooner than anticipated.
Uncertainty Ahead
Increasing global trade tension and Powell’s warning regarding inflation brings investors to expect ongoing volatility. Some analysts warn that, due to tariffs, tech companies might not even provide guidance during their next earnings calls. For Tesla, the strategic question remains as to whether the long-term innovation roadmap will be able to counter the short-term effects of tariffs, a sluggish market, and various political headwinds or not. As markets remain jittery, Tesla’s next moves, both in innovation and strategy, will be under keen observation.
