What Happened?
Shares of electric vehicle pioneer Tesla (NASDAQ: TSLA) jumped 2% in the afternoon session after market sentiment towards its robotaxi service improved amid a strategic shift in its supply chain.
An analyst from Stifel noted the company's robotaxi efforts could drive future growth, attributing a significant portion of their price target to this service. This view was supported by reports that Tesla's Robotaxi mules were spotted in a new state, signaling progress in its expansion plans.
Separately, news emerged that Tesla required its suppliers to avoid using China-made parts for vehicles built in the U.S. This move was seen as an effort to de-risk its supply chain amid geopolitical tensions and challenges related to costs and sourcing from the country.
After the initial pop the shares cooled down to $408.85, up 1.2% from previous close.
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What Is The Market Telling Us
Tesla’s shares are extremely volatile and have had 44 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago when the stock dropped 5.5% on the news that the stock's negative momentum continued as reports surfaced of a dramatic drop in its China sales for October.
The electric vehicle maker’s sales in China plunged to 26,006 vehicles, a three-year low that represented a 36% drop from the previous year and a 63.6% crash from September. This sharp decline caused Tesla's market share in the country to shrink from 8.7% to just 3.2%. The competitive pressure was highlighted by reports that competitor Xiaomi sold more vehicles in October than Tesla's combined sales of the Model Y and Model 3.
Separately, the broader U.S. stock market declined amid investor caution and a pullback in technology stocks. The main story? Investors are cashing in on a good run and feeling a bit cautious. After a fantastic run, many of those high-flying AI and technology stocks saw investors take profits: selling shares to lock in their gains. This is often called a "market rotation." Money is moving out of the red-hot tech sector (which some worry has become too expensive) and into other parts of the market that investors may currently deem more stable or reasonably-priced. There's a secondary reason for the cautious mood: The long government shutdown came to an end. Though it's typically interpreted as good news, it also means a flood of delayed economic reports will be released. For weeks, investors were "flying blind" without key updates on the economy's health, like inflation data and the jobs report. In typical "sell the news" fashion, investors may also be taking profits and selling in anticipation that the new data would potentially give the Federal Reserve reasons to slow or even pause future rate cuts.
Tesla is up 7.8% since the beginning of the year, but at $408.85 per share, it is still trading 14.8% below its 52-week high of $479.86 from December 2024. Investors who bought $1,000 worth of Tesla’s shares 5 years ago would now be looking at an investment worth $2,777.
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