Tesla shares experienced a significant downturn on Friday, dropping by over two percent as broader market weakness impacted the technology sector. This decline adds to a more substantial downward trend, with Tesla stock now down approximately ten percent since the approval of CEO Elon Musk’s unprecedented $1 trillion compensation package. At one point during the trading day, the stock price dipped below the $400 threshold, reaching lows not observed since September 15th, reflecting investor concerns surrounding the enormous financial commitment. While Tesla’s stock rebounded slightly on Thursday, that recovery proved short-lived, ultimately concluding the day with a decline of 6.6 percent—the company’s most significant drop since late July. The market’s reaction underscores the substantial weight investors are placing on the details of Musk’s lavish compensation and the expectations associated with his ambitious technological goals.
Despite the immediate market pressure, several analysts maintain a positive outlook for Tesla, driven primarily by the company’s planned advancements in artificial intelligence and autonomous driving technology. Dan Ives, a Wedbush analyst, remains bullish on Tesla’s prospects, believing that the company’s foray into AI represents the most critical chapter in its ongoing narrative. Ives characterized the passage of Musk’s compensation package as a “bright green light,” signaling the go-ahead for Tesla to aggressively pursue its plans for AI and autonomous technology. He emphasized that the company’s primary focus should be on developing self-driving capabilities and autonomous robotaxis, anticipating that Tesla will ultimately dominate the autonomous vehicle landscape over the next decade. Ives’s Street-high price target for Tesla stands at $600, reflecting his confidence in the company’s long-term potential.
A key element of Ives’s analysis revolves around the development of Tesla’s Optimus humanoid robot alongside its vehicle production. He believes that the successful advancement of Optimus is paramount, suggesting that vehicle delivery numbers, while important, are secondary to the overall AI progress. Investors are expected to exercise patience, acknowledging that the timeline for realizing the full potential of this technology is measured in years, not months. Tesla is currently engaged in pilot testing of its robotaxi service in both Austin, Texas, and the San Francisco Bay Area, but these tests are conducted with safety drivers present, reflecting a cautious approach to deploying fully autonomous vehicles.
Elon Musk has publicly stated that Austin’s robotaxi safety drivers will be removed by the end of the year, a significant step towards full autonomy. Furthermore, Tesla intends to expand testing to other cities, including Miami, Dallas, Phoenix, and Las Vegas, demonstrating a phased rollout strategy. The company’s purpose-built robotaxi, known as the Cybercab, is slated for production beginning in April of next year, indicating a relatively rapid timeline for this ambitious project. Ives highlights that Tesla’s long-term strategy hinges on the potential of Optimus, suggesting that investors should not solely focus on vehicle deliveries.
Tesla is undertaking a considerable investment, planning to construct a 1 million-unit Optimus production line at its Fremont, California factory, with an eventual expansion to a 10 million-unit facility at Giga Texas in Austin. The company has not yet provided a specific timeline for production, but current pilot production of Optimus is underway at the Fremont facility. Notably, Musk’s compensation package includes specific targets, demanding the delivery of 10 million active FSD subscriptions, 1 million Optimus robots, and 1 million robotaxis to fully activate the $1 trillion payout. The progress towards these goals will be critical in determining the long-term value of Tesla stock. Pras Subramanian, Lead Auto Reporter for Yahoo Finance, continues to monitor these developments closely, providing expert analysis on the evolving automotive landscape.