Elon Musk is attempting to shift Tesla Motors' (TSLA.US) focus from electric vehicles to humanoid robots, but skeptical investors view the company's stagnant sales growth and eye-watering stock valuation as leaving no room for error. In his push to transform the automaker into an artificial intelligence (AI) giant, Musk declared earlier this month on his social media platform X that "about 80% of Tesla's value will be from Optimus" – the company's robot development project. However, this remains a future vision. In stark contrast, Tesla Motors' 2025 earnings are projected to decline nearly 30%, while its robotaxi business remains years away from profitability and faces fierce competition from companies like Alphabet's (GOOGL.US) Waymo.
"Right now, people can put any valuation on the robotics business," said Thomas Thornton, founder of Hedge Fund Telemetry. "The market hasn't done any substantial research on robotics yet: What companies are in this space? What's the technology level? What's the revenue scale? Is there really market demand for humanoid robots?"
Since 2023, the electric vehicle industry has experienced a comprehensive growth slowdown, a trend that intensified in 2024, impacting Tesla Motors' performance. Yet simultaneously, its stock price has become increasingly expensive: based on forward 12-month expected earnings, Tesla Motors trades at approximately 155 times earnings – a level similar to the 2021 tech stock boom when optimistic expectations about EVs becoming mainstream first pushed Tesla's market cap above $1 trillion.
**Most Expensive Stock**
This valuation makes Tesla Motors the most expensive company among the "Magnificent Seven" (which also includes Google, Amazon (AMZN.US), Apple (AAPL.US), Meta (META.US), Microsoft (MSFT.US), and NVIDIA (NVDA.US)). The second-highest valued is AI chip giant NVIDIA, but its expected P/E ratio is only 31 times. Among all U.S. publicly traded companies with market caps of at least $100 billion, only Palantir Technologies (PLTR.US) has a higher P/E ratio than Tesla Motors.
"Tesla has a growth company valuation, but it has achieved virtually no meaningful revenue growth over the past two years," said Dmitry Shlyapnikov, an analyst working with portfolio managers at Horizon Investments. "Musk needs to provide investors with a completely new growth story, and Optimus is the answer."
This also explains why Musk's unprecedented trillion-dollar compensation package heavily depends on the Optimus project. However, given Musk's frequent changes to the company's strategic positioning, it's no wonder Tesla Motors investors feel confused.
Musk's original vision was for Tesla Motors to dominate the global electric vehicle market, and he indeed achieved this goal at one point. In April 2024, Musk shifted targets, declaring that autonomous vehicles would become the company's core business. Investors readily accepted this, driving Tesla's stock price significantly higher. Subsequently, the CEO threw his full support behind Trump during the 2024 U.S. presidential election. After Trump's victory, market expectations that Musk's close relationship with the new administration would clear obstacles for Tesla Motors' autonomous driving business directly triggered a sharp stock price surge.
**"Musk Risk Exposure"**
Today, Musk has parted ways with Trump, and Tesla Motors' autonomous driving progress has been sluggish. The company encountered setbacks on the first day of launching its robotaxi service in Austin – deploying only a few vehicles that experienced numerous problems. Its ride-hailing service launched in California has yet to achieve full autonomy, and expansion to new cities has been slow. On Thursday, Tesla Motors received approval to begin testing autonomous vehicles in Nevada.
The path to commercializing autonomous driving technology remains highly uncertain, and investor confidence in Tesla Motors' ability to dominate this field continues to wane. Meanwhile, Tesla Motors' global vehicle sales continue declining, coupled with concerns about potential tightening of automotive tariffs, severely impacting its stock price: it has fallen approximately 25% from its mid-December high and has remained within a narrow trading range since mid-May.
Tesla Motors' stock has declined more than 10% year-to-date, making it one of the worst-performing 100 companies among S&P 500 constituents. In contrast, the S&P 500 index has gained 12% this year.
"The market has never strictly viewed Tesla as an automotive company, but rather as a bet on Musk's ability to 'turn science fiction futures into reality,'" said Steve Sosnick, chief strategist at Interactive Brokers. "The previously promised robotaxi revolution seemingly no longer suffices to support its valuation, so pivoting to humanoid robots is another attempt to achieve this goal."
Whether Musk's renewed focus on the Optimus project can break Tesla Motors' stock price malaise remains unknown – especially since Tesla Motors' core issues appear to be technical. For example, reports this week indicated that Tesla vehicles' signature retractable door handles, mechanical unlocking devices, and power systems could become "deadly hazards" in crash accidents, potentially making it difficult for drivers and passengers to escape from burning vehicles.
Of course, for many investors, Tesla Motors' value doesn't solely depend on electric vehicle sales or financial statement figures. In their view, investing in Tesla Motors is essentially betting that Musk can continue creating profitable growth points amid ongoing waves of transformation in transportation and technology.
"If you firmly believe Elon Musk is a genius who can change the world through invention, then Tesla will be the only choice," said Horizon's Shlyapnikov. "For public investment portfolios, investing in Tesla Motors is the only way to gain 'Musk risk exposure.'"