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Tesla stock is falling after the stock was downgraded by UBS group, which said the shares have risen “too much, too soon,” before any real payoff from the company’s focus on artificial intelligence.
Although Tesla is primarily an electric vehicle company, analysts have put much more value on its pursuit of AI and other technology, such as its Optimus robots, Dojo supercomputer, and a potential fleet of self-driving robotaxis. Ark Investment Management, for example, has forecast where Tesla is worth $2,600 per share by 2029, with 90% of its value coming from robotaxis.
But such forecasts rely on investors maintaining their confidence that Tesla — and CEO Elon Musk, who has faced some controversy over his decision to launch AI startup xAI — will be able to achieve its goals. Musk has said he wants at least 25% control of Tesla before moving forward with AI plans. He currently owns around 13% of the company’s shares, although Tesla is fighting to get his 2018 compensation package through the courts, which could increase his ownership to 20.5%.
“While TSLA is investing heavily in AI and the tech is making progress, investment is costly, pace of improvement may slow and the payoff is long dated,” UBS analysts led by Joseph Spak wrote in a Thursday note to investors. “If market enthusiasm for AI diminishes, this may impact TSLA’s multiple.”
UBS on Thursday downgraded its position on Tesla from neutral to sell. It also raised its price target to $197 per share from $147 per share. UBS said it would need to see “an even larger opportunity” than what has been already shown to justify rating the stock a buy.
Tesla stock fell more than 2% in pre-market trading Friday. The stock had already fell by more than 8% on Thursday — putting an end to Tesla’s 11-day streak of gains — after it was reported that Tesla is pushing back Musk’s promised robotaxi unveiling by two months, to October. Bloomberg News reported that the decision was made to give teams working on the project time to build additional prototypes.
Over the past month, Tesla stock has gained more than 33%, reversing much of the losses it took earlier in the year thanks to poor first-quarter sales and mass layoffs worldwide.