Investors Throw Side-Eye at Tesla’s Optimus-tic $1.4T Market Cap

Tesla’s humanoid robot took a suspicious tumble while handing out bottled water during a demo in Miami over the weekend. It’s sus because the Optimus bot appeared to some X users to take off a nonexistent headset before falling, prompting concerns that it was being controlled by a remote human operator rather than AI alone. 

Whether a human is pulling the robots’ strings or not, it’s a bad look for Tesla at a time when investors are doubting its future. 

Tapping the Brakes

Morgan Stanley cut its rating of Tesla on Monday to “equal weight,” which is equivalent to a hold. It’s the first time the bank has downgraded Tesla in more than two years, and the company’s shares fell a few percent yesterday as traders digested the evaluation. On Friday, the stock was within 5% of its all-time closing high. 

Investors still have high hopes for Tesla, with Morgan Stanley targeting a $425 share price, still up for the year. But concerns have risen that the stock may be overvalued. Tesla’s the second-most expensive company in the S&P 500, behind Warner Bros. Discovery, with its shares trading at 210 times the company’s projected earnings. 

Specifically, analysts aren’t certain Tesla’s immediate future will rev up profits:

• Morgan Stanley’s key concern is flagging EV sales: The bank expects Tesla’s North American sales to drop 12% next year. Tesla’s revenue was boosted in the fall quarter by consumers rushing to buy cars before EV tax incentives expired, but before that, it had two straight quarters of declines. Morgan Stanley sees the dip as industry-wide: The bank also slashed its ratings for smaller rivals Lucid and Rivian, citing tariff concerns and the disappearing EV tax credits. 
• Tesla has pushed a narrative of its next chapter that goes far beyond Cybertrucks, and much of the company’s stock climb has been ascribed to its futuristic aspirations. Morgan Stanley thinks its humanoid robots are worth $60 per share, even if they’re still struggling with liquid refreshment.

Driver’s Seat: Tesla’s share price has, in part, hinged on investors having faith in its visionary founder. Shares dipped this year amid concerns that Musk was spending too much time on other projects, such as the Department of Government Efficiency. Critics also thought his political antics would put off would-be Tesla buyers (cue anti-Musk bumper stickers). Now that the DOGE experiment is over, the world waits to see which shiny object captures Musk’s gaze next. Jupiter? A cage match with Sam Altman? Or, dare we dream, the actual car company that made him rich?