- Tesla shares rise despite reporting a decline in revenue and earnings
- More focus on robots as two electric vehicle models discontinued
- This doesn’t mean EV is taking a back seat
- Controversial investment in Musk’s xAI business
Dan Coatsworth, head of markets at AJ Bell, comments:
“Elon Musk must have had the words ‘dream big’ drilled into him as a child, as his business ventures are fixated on tomorrow’s world. Over his career, he’s been involved in companies that have disrupted various industries, from electric vehicles (Tesla) to rockets (SpaceX) and AI (OpenAI).
“While there is no denying Musk is typically ahead of the curve, holding on to the lead is not guaranteed, as evidenced by Tesla being overtaken by BYD. The loss of power with the electric vehicle interests is telling, and there are now plans to discontinue two vehicle types.
“Under the circumstances, one might expect Tesla’s share price to be on its knees, yet it recently hit a new record high. Investors have even pushed up the share price in pre-market trading off the back of the latest financial results, which showed a decline in annual revenue and earnings.
“There’s a simple explanation. Tesla is a story stock and there’s a new narrative to excite people. Redeploying some of Tesla’s car production facility to build humanoid robots theoretically puts it in a stronger position in the race to build as many machines as possible.
“The rise of the robots is central to the rekindled investor excitement over Tesla. The Optimus machines are designed to do everyday tasks and free up humans to do more productive jobs. Think robots flipping burgers and putting out the rubbish in the near term, and in the future to potentially tutor children and walk dogs.
“While it may look like electric vehicles are taking a back seat, that’s not the case. Tesla still needs this part of its business to tick over smoothly as it helps fund Musk’s robot vision, which is getting bigger by the day.
“These robots use AI, and it’s notable that Tesla is ploughing $2 billion into Musk’s xAI business despite a large chunk of shareholders opposing the investment. It feels there is an element of what Musk wants, Musk gets.
“Musk needs the electric vehicle business to stay relevant as it is a key part of the ambitious targets that dictate whether he scores the $1 trillion prize set by Tesla. He needs the business to excel at electric vehicle and robot production, self-driving subscriptions and robotaxis in commercial use – and make big profits.”
