Tesla stock is experiencing a decline after UBS Group downgraded its rating, citing that the shares have increased “too much, too soon” without any substantial payoff from the company’s artificial intelligence initiatives.
UBS analysts led by Joseph Spak highlighted that while Tesla is heavily investing in AI and related technologies, such as Optimus robots, the Dojo supercomputer, and a potential fleet of self-driving robotaxis, the high cost of these investments and the long-term nature of their payoff create uncertainty. The analysts expressed concerns that if market enthusiasm for AI diminishes, it could negatively impact Tesla’s valuation.
UBS downgraded Tesla from neutral to sell but raised the price target to $197 per share from $147. They stated they would need to see a significantly larger opportunity to consider rating the stock as a buy.
On Friday, Tesla’s stock fell more than 2% in pre-market trading, adding to an over 8% drop on Thursday. This decline ended Tesla’s 11-day winning streak. The recent fall in stock price followed reports that Tesla is delaying the unveiling of its promised robotaxi by two months to October, allowing additional time for prototype development.
Despite the recent decline, Tesla’s stock has gained more than 33% over the past month, recovering from earlier losses due to poor first-quarter sales and global layoffs.