A notable cryptocurrency trader has ignited a debate surrounding Tesla's substantial $1.3 trillion market valuation. This challenge calls upon proponents of the electric vehicle manufacturer to articulate the rationale behind such a high market capitalization. Concerns have been raised regarding Tesla's artificial intelligence capabilities in comparison to industry rivals, the intense competition faced by its automotive division, especially within the Chinese market, and the less-than-stellar performance of its social media platform, X. This commentary prompts a critical examination of the various elements contributing to Tesla's perceived value.
The cryptocurrency analyst, known as DonAlt, initiated this discussion on a social media platform, directly posing the question of how Tesla’s current market capitalization is justified. He specifically highlighted several areas of weakness: the perceived inferiority of Tesla's AI compared to competitors, the significant challenges its vehicles face in the competitive Chinese market, and the limited success of X. He provocatively asked if the company's valuation was predominantly driven by the achievements and future prospects of SpaceX.
Furthermore, an in-depth analysis of Tesla’s automotive division reveals a challenging period. The fourth quarter of 2025 witnessed a decline in revenue, dropping from $97.7 billion in the previous year to $94.8 billion, marking an unprecedented annual decrease in the company’s history. This downturn was accompanied by a substantial 61% year-over-year drop in net income for Q4 and a 46% reduction for the entire fiscal year. Deliveries for the full year reached 1.636 million units, representing an approximate 9% decrease from 2024, signifying two consecutive years of declining deliveries. The European market also showed signs of struggle, with sales in France plummeting by 42% in January, recording only 661 vehicles, the lowest in over three years. Similarly, Norway experienced a nearly 90% drop in registrations during the same period, a decline attributed to Elon Musk’s political engagements and fierce competition from manufacturers like BYD and Stellantis. In a strategic shift, Musk also ceased production of the Model S and Model X to repurpose factory space for the development of humanoid robots.
Despite these challenges, Tesla endeavors to redefine its identity as a “physical AI company” rather than solely an automotive manufacturer. The Cybercab robotaxi, slated for production in April, is anticipated to be priced at approximately $25,000. However, Musk has cautioned that initial production will be notably slow due to the novel nature of nearly all its components. Investor Gary Black of The Future Fund suggested that Tesla’s stock could reach $500 if the company demonstrates hundreds of unsupervised robotaxis operating in Austin, thereby proving the global scalability of its technology. Nonetheless, Black acknowledged that the long-held belief that only Tesla could achieve unsupervised autonomy has been debunked, citing advancements by Waymo, Baidu’s Apollo Go, and Nvidia’s technology, which he believes is democratizing unsupervised autonomy. The Optimus robot, while promising, remains largely speculative. Musk has projected that it could generate over $10 trillion in long-term revenue, with the Gen 3 version expected to be unveiled in Q1 2026. However, as of now, no significant revenue from this venture has materialized.
The discussion also extended to the influence of SpaceX, particularly following its merger with xAI, which valued SpaceX at an impressive $1 trillion. Tesla’s $2 billion investment in xAI provides its shareholders with an indirect stake in the space exploration company. Some investors view TSLA as an indirect gateway to potential SpaceX IPO access, a factor that could be bolstering the stock’s performance. Wedbush analysts have indicated a growing possibility of Tesla merging with SpaceX/xAI within the next 12 to 18 months. From a technical analysis perspective, TSLA experienced a 0.5% downturn, trading below all major Exponential Moving Averages (EMAs) except the 200 EMA, which stands at $394.15. The Supertrend indicator at $444.54 remains bearish, and the stock is positioned within the 0.618 Fibonacci retracement zone ($383-$429), a critical support area. Immediate support is identified at $394 (the 200 EMA), followed by $383. A breach below $383 could trigger further selling towards $347. For a reversal, TSLA would need to regain the $430 level and subsequently surpass the Supertrend at $444.54.
This comprehensive analysis brings to light the multifaceted challenges and speculative opportunities that define Tesla’s current market standing. The debate over its valuation underscores the complex interplay of its automotive business, ambitious AI and robotics projects, and its indirect ties to the high-flying SpaceX. As the company navigates these diverse sectors, its future trajectory remains a subject of intense scrutiny and varied expert opinions, leaving investors to weigh the concrete financial performance against the potential of its more visionary ventures.