What Happened?
Shares of electric vehicle pioneer Tesla (NASDAQ: TSLA) fell 9.5% in the afternoon session after 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.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Tesla? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Tesla’s shares are extremely volatile and have had 49 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 17 days ago when the stock dropped 7.4% on the news that CEO Elon Musk announced over the weekend his intention to form a new political party, the "America Party."
The move has intensified a public feud with President Donald Trump and sparked significant investor concern about Musk's increasing political involvement and potential distractions from running the electric vehicle giant. The announcement immediately weighed on the stock, which fell nearly 7% in pre-market trading, reflecting market unease with the venture. This political controversy adds to existing headwinds for Tesla, which recently reported its second consecutive quarterly drop in vehicle deliveries for Q2 2025. The company delivered 384,122 vehicles, a 13.5% decline from the same period last year, and missed Wall Street's expectations. Analysts from Wedbush noted that investors are showing a "broader sense of exhaustion" with Musk's political activities during a crucial time for the company.
Tesla is down 20.2% since the beginning of the year, and at $302.55 per share, it is trading 37% 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 $3,203.
Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.
