Tesla Is Having A Tough Year, But This Won't Stop 'Musk Faithfuls' From Believing It

Since the beginning of this year, Tesla's stock price has continued to plummet, even causing its most ardent supporters on Wall Street to become cautious. However, there is one group buying the electric vehicle manufacturer's stock at an unprecedented rate: Elon Musk's fans, who firmly believe that Musk will bring them substantial returns.

Ask Aime: What is driving Tesla's stock price to plummet despite ardent supporters' confidence in Elon Musk?

For a long time, tesla has had a group of fervent retail investors who follow every word Musk says on the social media platform X, conduct detailed analyses based on his statements, and largely act as Tesla's hype team.

But since hitting a record closing high of $479.86 on December 17, 2024, Tesla's stock price has fallen nearly 50%, due to concerns about weak demand, increased competition, and the controversial role of CEO Musk in the Trump administration, which is believed to be harming consumer demand.

However, the halved stock price has not deterred retail investors; their enthusiasm for Tesla stock is now higher than ever. According to trading data provided by J.P. Morgan's global equity derivatives strategist Emma Wu, as of Thursday, retail investors have been net buyers of Tesla stock for 13 consecutive trading days, investing a total of $8 billion, the highest level on record.

Nicholas Colas, co-founder of DataTrek Research, pointed out that "Tesla made some rookie to mid-stage public market investors extremely wealthy, a lot of people became millionaires because of this stock." 

"People don't forget that. And they will come back to stock again and again if they feel it has been beaten up." 

Colas added that people do not forget this; investors have a deep impression of Tesla stock. If they feel the stock is undervalued, they will return to buy it again and again.

Tesla's stock price has fallen nearly 40% this year, making it the worst-performing component of the S&P 500 index. The collapse has been so brutal that Musk had to reassure Tesla employees during an all-hands meeting on Thursday.

Musk stated that the company's goal this year is to produce 5,000 Optimus humanoid robots. He also urged employees to continue holding the company's stock despite the sell-off. "There are times when there are rocky moments, but what I'm here to tell you is that the future is incredibly bright and exciting, and we're going to do things that no one has even dreamed of."

Even U.S. Secretary of Commerce Howard Lutnick recently called on the American public to buy Tesla stock, because "It will never be this cheap again."

However, it is evident that what Wall Street once considered favorable—Musk's appointment as head of the Department of Government Efficiency (DOGE)—has become a burden. His increasing presence on the political stage and involvement in various controversial events have sparked strong opposition to the company and its leader.

Recently, nationwide boycotts of Tesla have escalated, with Tesla stores, vehicles, and charging stations frequently being vandalized or even set on fire.

Tesla's sales in major European markets such as France and Germany, as well as in China and Australia, have declined. Although U.S. sales data will not be available until next month, Wall Street analysts have already downgraded sales and profit expectations.

Long-time Tesla bull Adam Jonas, an analyst at Morgan Stanley, lowered Tesla's target stock price and sales expectations on Thursday, citing increased market competition, aging products, and buyer resistance due to negative brand sentiment. However, he maintained a buy rating on Tesla stock, believing that the current short-term negative expectations will not fundamentally alter the company's future narrative of benefiting from robotics and artificial intelligence.

Colas further noted, "These kinds of investors don't care about valuations at all. They just believe in the future of the company and Elon Musk's abilities"