Tesla Has Long Been a ‘Hope’ Stock. But What Are Investors Hoping for Now?
Elon Musk’s changing personal priorities raise questions about where the automaker is heading
Tesla has long sold investors on the hope of a brighter future. But these days, what is that mission?
At first, the electric automaker, founded 20 years ago, was to many investors and fans the answer to climate change, especially as Elon Musk showed the world that a zero-emissions vehicle could be both cool and profitable. At one point, he said helping to reduce the risk of catastrophic climate change is why Tesla “exists.”
As time wore on and others began chasing the EV dream, Musk positioned Tesla as something else, a gateway for artificial intelligence to move from the digital world into the physical world through driverless cars and then humanoid robots.
Tesla, it seemed, was full of limitless potential.
But lately, Musk sounds less urgent about climate change. And last month, Musk threw investors a curveball. That bright AI future he has talked about for so long? Well, he doesn’t feel comfortable doing it at Tesla after all—unless he gets another giant payday that gives him more control.
Such threats immediately raise an existential question for Tesla investors: What makes the company special in a world where Musk doesn’t see climate change as a near-term risk and is wavering on his commitment to pursue AI at Tesla?
Shares of Tesla, which have already valued the company well beyond any other mere carmaker, have fallen more than 20% this year through Friday while other tech giants, such as Microsoft and Nvidia, have seen huge gains fueled by excitement around their work in AI.
In January, Adam Jonas, a high-profile analyst with Morgan Stanley, attributed 22% of his price target for Tesla’s stock to the future value created by an autonomous car fleet of about 220,000 vehicles by 2030. But he also pulled back some of his expectations after Musk’s comment about control.
“Tesla is the only truly AI-enabling stock under our coverage,” Jonas told investors in a note. “Any change of organizational or legal structure that impedes Tesla’s ability to participate in the development of AI could be detrimental to the…investment thesis.”
Success in bringing out a profitable EV with the Model 3 sedan helped make Tesla the first automaker to be valued, for a time, at more than $1 trillion. After years of struggle, Musk had delivered one of his most ambitious promises, giving him new credibility for what else he might tackle.
During that run up in 2020, Jonas remarked that the “power of hope” was helping fuel Tesla’s dramatic rise that defied traditional automotive valuations.
By then, Musk had long been selling the future of Tesla as something more than just electric cars.
In 2016, for example, he painted a picture of the automaker’s future with fully autonomous vehicle technology evolving out of its driver-assistance Autopilot efforts. He targeted demonstrating a driverless car crossing the country by the end of 2017. That didn’t occur.
In 2019, as some Tesla investors questioned whether the Model 3 could live up to Musk’s goals, the CEO held a special presentation for investors to tout the company’s efforts to develop the autonomous technology and aimed for a robot taxi fleet by the end of 2020. That didn’t occur.
Then, almost a year ago, Musk asked Tesla investors to take a leap of faith that the company’s future was all about rolling out AI software to enable robot cars as its once-explosive delivery growth showed signs of slowing and he was resorting to price cuts on an aging lineup.
“We do believe we’re…laying the groundwork here, and that it’s better to ship a large number of cars at a lower margin, and, subsequently, harvest that margin in the future as we perfect autonomy,” Musk told investors last April after disappointing quarterly results.
Investors seemed to buy into it. Shares more than doubled last year after a bad 2022, in part driven by investors worried that Musk was too distracted by his acquisition of the social-media platform now known as X.
Those distractions have only multiplied as he takes increasingly more-controversial positions on X that worry Tesla fans. That concern erupted anew this past week when some loyal faithful, including a supporter named Chuck, asked him to show more restraint.
“Chuck labors under the illusion that western civilization is not at risk, when it clearly is. If America falls, nothing else matters, not stocks, not properties, nothing,” Musk replied. “All civilizations eventually fall, as history shows, but we want this one to last as long as possible.”
That was the kind of passion Musk once brought to Tesla’s mission.
“Climate change is the biggest threat that humanity faces this century, except for AI,” Musk told a journalist in 2017. “I keep telling people this. I hate to be Cassandra here, but it’s all fun and games until somebody loses a f—ing eye.”
These days, Musk’s tone has changed. He has been advocating against corporate values such as ESG, or environmental, social and corporate governance, that aim to encourage investments in the kinds of goals he once touted. “ESG is the devil,” Musk has said.
And Musk appears to be distancing himself from some of the green movement that had so embraced him years ago. At a public event in December, Musk described the alarm over climate change as “somewhat overblown in the short term,” and called for a pragmatic approach to reducing carbon over the “next several decades.”
“Some of the environmentalist movement…is part of what is causing people to lose hope in the future,” Musk said. “So, I guess what I’m trying to say is that we should have hope in the future. We should be excited about the future, and we should build the future we want.”
That future, in Musk’s telling, involves humanoid robots, dubbed Optimus, that he says Tesla is working to develop, using the technology behind its driverless cars.
“Optimus, obviously, is a very new product, an extremely revolutionary product and something that I think has the potential to far exceed the value of everything else at Tesla combined,” Musk told analysts in January.
“I think,” he added, “we’ve got a good chance of shipping some number of Optimus units next year.”