What Happened?

Shares of electric vehicle pioneer Tesla (NASDAQ: TSLA) jumped 3.9% in the afternoon session after CEO Elon Musk backed a claim that the company could reach a staggering $20 trillion valuation. 

The comment, in which Musk stated that “extreme execution is needed, but a valuation of $20 trillion for Tesla is possible,” came after the stock tumbled nearly 9% in the prior session. The previous day's decline followed the company’s second-quarter earnings report, which revealed a 12% year-over-year drop in revenue, its sharpest decline in over a decade. Despite the recent disappointing results and concerns over short-term growth, Musk's bullish long-term forecast for Tesla's potential in AI, robotics, and autonomous driving appeared to resonate with investors, sparking a rebound in the share price. 

Separately, Business Insider reported that Tesla's robotaxi service will launch in San Francisco before the end of the week. While the initial launch is expected to include safety drivers, the mere presence of the service in a major urban center like San Francisco represents a crucial step forward in Tesla's ambitious robotaxi plans, suggesting progress in a key area of future growth.

After the initial pop the shares cooled down to $318.06, up 4.3% from previous close.

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What Is The Market Telling Us

Tesla’s shares are extremely volatile and have had 50 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 a day ago when the stock dropped 9.5% on the news that the company reported disappointing second-quarter results and warned of future challenges. 

The electric vehicle maker’s net income and revenue both dropped for the second consecutive quarter, with sales declining in key markets like the United States and China. Compounding the weak results, CEO Elon Musk warned investors that Tesla could face a “few rough quarters” ahead. He attributed the potential future weakness to the planned elimination of U.S. government electric vehicle tax credits, which had significantly supported the company's financials. Reports highlighted that without these credits, which amounted to $2.8 billion in 2024, the company would not have been cash-flow positive, underscoring the potential impact of their removal.

Tesla is down 16.1% since the beginning of the year, and at $318.06 per share, it is trading 33.7% 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 $3,099.

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