Tesla's stock plummeted by 12% on Wednesday, erasing nearly $100 billion in market value, as CEO Elon Musk's remarks about humanoid robots and driverless taxis failed to reassure investors concerned about shrinking profit margins at the electric car manufacturer.
On Tuesday night, Tesla reported its lowest quarterly profit margin in five years, with earnings per share falling short of expectations for the fourth consecutive quarter.
This was Tesla's largest single-day drop since 2020, bringing its market value down from over $1 trillion in 2021 to under $700 billion.
Nonetheless, Tesla remains the world's most valuable automaker, with its valuation reliant on investors' expectations of massive future profits from yet-to-be-released products such as promised driverless taxis and robots.
Jeff Osborne of TD Cowen commented, "Other than (energy) storage, all of Musk's enthusiasm on the conference call was centered on products that do not yet exist."
Tesla's weak performance, along with Alphabet's reported increase in capital expenditures, set a poor tone for the second-quarter reports of Wall Street's most valuable companies.
Shares of Alphabet, Google's parent company, fell by nearly 5%, and the losses in both Tesla and Alphabet stocks led to a significant sell-off on Wall Street, with investors concerned about high valuations.
Tesla's electric vehicle deliveries have declined for two consecutive quarters, and the company has not introduced the low-cost model that many had anticipated, causing buyers to turn to competitors' electric vehicle manufacturers. For example, China's BYD far surpassed Tesla in sales in Singapore in the first half of 2024.
