An awful lot has gone right for the Tesla (LSE: TSLA) share price this year, but lately things have started to go wrong. It’s fallen 10.7% in the last month, which for a hyper-volatile stock like Tesla isn’t such a big move. But is it a sign of further challenges to come?
2023 will be remembered as the year of the ‘magnificent seven’ US tech stocks that have rocketed on the back of the generative artificial intelligence (AI) frenzy. Nvidia is the most remarkable, up a staggering 227.17% year-to-date.
Going into reverse
Elon Musk’s electric vehicle (EV) maker has also done brilliantly, with the share price rising 120.93% in 2023. Few saw that coming after a rough ride for tech in 2022.
My table shows that Tesla has fallen faster than the rest of the seven over the last month. Although in fairness, Meta Platforms (which fell 8.9%) and Apple (down 8.28%) have also been sliding as sentiment weakens over Fed rate hike fears.
| One month | Six months | Year-to-date | One year | Five years | |
| Amazon | -0.40% | 41.29% | 55.14% | 2.58% | 32.29% |
| Apple | -8.28% | 22.24% | 44.07% | 11.66% | 216.62% |
| -1.29% | 45.47% | 47.00% | 19.73% | 112.7% | |
| Meta Platforms | -8.90% | 65.92% | 132.69% | 82.36% | 65.17% |
| Microsoft | -3.64% | 29.78% | 35.11% | 22.05% | 188.17% |
| Nvidia | 0.23% | 101.74% | 227.17% | 196.41% | 567.45% |
| Tesla | -10.70% | 16.10% | 120.93% | -16.15% | 1,087.57% |
Investors are wary across the board after enjoying such remarkable gains. Many also suspect the AI hype has been overdone. The Nvidia share price should have rocketed when it posted 101% year-on-year quarterly sales growth to $13.5bn last Wednesday. Instead, it ended the week 6.6% lower.
Investors have worries peculiar to Tesla. They were unnerved by last month’s Q2 financials, despite a steady 7% increase in total gross profit to $4.53bn, with revenues jumping 47% to $24.93bn. Instead, they fretted over Tesla’s shrinking margins, which fell from 19.3% in Q1 to 18.2%. That’s down from 25.02% a year ago.
Tesla has driven the EV revolution but now faces stiff competition as rivals play catch up. It been forced to slash global prices multiple times this year. This month, it nearly doubled discounts on its luxury Model S and Model X vehicles in China. Wider concerns over the Chinese economy haven’t helped sentiment either.
It’s still a monster stock
Everything Musk does generates an outsized reaction, and that’s the case with the Tesla share price. It’s one of the reasons investors love it. There’s never a dull moment plus, of course, it’s up more than 1,000% in the last five years, as my table shows.
With a market-cap of $748bn, Tesla will never match previous growth levels. If it grew another 1,000% over the next five years it would be worth $748tr. The annual US economy is only worth around $24tr.
The self-driving revolution still risks generating a backlash, with regulators also probing seat belt failures, steering-wheel issues and driver-assistance concerns. There is a danger of Tesla racing ahead of itself, but then with Musk at the wheel, it always will be. Which is another reason investors love it.
There’s nothing wrong with Tesla that a nice little dip wouldn’t solve. Will we get one? I’ve no idea. But if we do, I’ll buy it.
