It’s been a rough year for Tesla. Shares are down roughly 20% in the past 12 months as Elon Musk’s electric vehicle giant has struggled with flagging sales and increased competition, particularly in China, representing a loss of nearly $200 billion in market cap. The company’s stock climbed on Monday, however, gaining 3% as markets appeared to steady after last week’s sell-off.
Tesla remains in the headlines, particularly after the Wall Street Journal reported Saturday that Tesla could enter into a revenue-sharing agreement with xAI, Musk’s artificial intelligence company. Musk said the report was “not accurate” in a post late Saturday on his social media platform X.
The company’s slipping market share in China, the world’s largest car market, has also been in focus. In August, however, Tesla sales within the country jumped 37% compared to July, according to new data from the China Passenger Car Association, tempering some of the doom and gloom.
Any good news from China tends to move Tesla’s stock in the right direction, Morningstar equity strategist Seth Goldstein told Fortune Monday. Nonetheless, he said, Monday’s market rally is likely the biggest factor driving Tesla shares up.
“I know a 3% move is big for many companies,” he said, “but for Tesla, if it’s under 5%, it likely means it’s not as company-specific as more the broader market.”
While Tesla’s stock tends to move with the market, Goldstein noted, it’s also much more volatile. Last September, Tesla shares peaked just short of the $280 mark. By April, they had plunged as low as $138.80 as the company shed over $400 billion in market cap.
Revenue split with xAI would likely hurt Tesla's stock
The stock is still down 12% year to date after a pair of disappointing earnings calls, compared to a roughly 15% gain for the S&P 500. Nonetheless, the likes of ARK Invest CEO Cathie Wood headline a vociferous group of Tesla bulls, whose case largely hinges on the long-term growth opportunities from using AI to develop autonomous driving software.
According to the Journal, investors in xAI have seen a proposal for Tesla to license the AI company’s models to help power its driver-assistance software, which the EV maker calls “full self-driving,” as well as other features. Executives at xAI have discussed the potential of an even revenue split from the software, the report said.
If anything, Goldstein said, such an arrangement would likely weigh on Tesla’s stock.
“If we say that, all of a sudden, another company is coming in to potentially share some of the [full self-driving] revenue or profits or what have you,” he said, “that's a negative for Tesla shareholders.”
Since the stock was not down on the news, he said, it’s likely the market did react much at all.