TLDR:
- Tesla stock rose 1.6% in premarket trading Thursday after falling 4.9% on Wednesday
- The EV maker’s shares had declined in 10 of 12 weeks before this week
- Trade war concerns and inflation worries are impacting investor sentiment
- Fed Chair Powell warned tariffs would likely cause temporary inflation with potentially persistent effects
- Factors affecting Tesla include slowing sales growth, Musk’s politics, and tariff impacts
Tesla shares rose 1.6% in premarket trading Thursday, hitting $245.54. This came after a 4.9% drop on Wednesday, bringing the weekly decline to 4.2%.
The stock had fallen for 10 of the past 12 weeks prior to this week. Several factors have weighed on Tesla, including slowing sales growth, CEO Elon Musk’s politics affecting brand perception, and tariffs from the escalating trade war.
Fed Chair Jerome Powell 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.”
Broader Market Concerns
The broader market also showed signs of strain. S&P 500 and Dow Jones futures were up 1% and 0.8% respectively on Thursday morning.
Nvidia stock dropped 6.9% on Wednesday. This helped send the Nasdaq Composite down 3.1%.
The White House “essentially blocked Nvidia from selling its key H20 chips to China,” according to Wedbush analyst Dan Ives. This move contributed to market anxiety about trade tensions.
Ives compared the current tariff situation to “economic armageddon” in a CNBC appearance. He predicted that if current tariffs remain in place, it could lead to a 15-20% demand reduction across the board.
Tesla’s Future Outlook
Despite current challenges, some analysts see long-term potential in Tesla’s autonomous driving and AI initiatives.
Tesla’s autonomous driving and AI-related projects, including the Optimus robot program, could potentially make up 90% of its total valuation.
The company is designing all components for Optimus from scratch. They plan to use it internally at facilities in 2025, building around 10,000 units annually.
However, RBC Capital Markets analyst Tom Narayan recently lowered Tesla’s price target from $440 to $320. This adjustment resulted from increased competition in the Full Self-Driving (FSD) market.
Narayan also revised his pricing forecast for Tesla’s FSD, lowering it from $100 to $50 per month. He anticipates autonomous driving technology could soon become standard and widely available.
The Optimus robot program specifically is expected to bring over $10 trillion to the company in the long run. Tesla anticipates Optimus training needs to be ten times greater than autonomous vehicles.
JDP Capital Management remains positive on Tesla due to the potential of its FSD and Optimus technologies. They noted in their Q4 2024 investor letter that Tesla stock was up 115% in 2024.
The firm benefited from purchasing Tesla shares in June 2024, after the stock had declined about 30% in the first part of that year.
While many acknowledge Tesla’s growth potential, some analysts believe other AI stocks might deliver higher returns in a shorter timeframe.
For now, investors are keeping a close eye on how trade tensions develop and whether tariff adjustments might come through negotiations.
Ives suggested that many tech companies won’t be able to absorb high tariff increases. Instead, this cost will likely be passed on to consumers, potentially leading to margin erosion and sales declines.
As uncertainty persists, some companies may even refuse to provide guidance in first-quarter earnings calls due to the tariff situation.
For Tesla specifically, the coming weeks will show whether the stock can break its downward trend or if external pressures will continue to outweigh its long-term technological promises.
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