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Tesla Stock Surge Leads to Downgrade. Why Elon Musk Is a ‘Wartime’ CEO.

Sep 15, 2025 04:46:00 -0400 by Al Root | #EVs

Tesla investors will soon vote on a 2025 performance award for CEO Elon Musk that could be worth $1 trillion if all performance incentives are met. (Getty Images)

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Tesla stock shot higher Monday as CEO Elon Musk gets ready for an artificial intelligence “war.”

Shares of the electric-vehicle maker traded as high as $425.70 before sliding back to $410.26, up 3.6% on the day. The S&P 500 and Dow Jones Industrial Average rose 0.5% and 0.1%, respectively.

A downgrade to Sell from Hold after Monday’s early rally might have taken some of the wind out of Tesla’s sales. CFRA analyst Garrett Nelson wrote, “the stock’s valuation has become decoupled from fair value and underlying fundamentals.” He maintained his $300 price target for shares.

Still, Monday’s move was significant, wiping out year-to-date losses, and came after shares rallied 13% this past week. Exactly why it rose that much is open for some debate. Technical traders became excited by the recent momentum that took Tesla past the highs reached in the Spring.

EV sales were strong in August, according to industry data providers. Buyers appear to be rushing to beat the removal of the $7,500 federal EV purchase tax credit, which goes away at the end of September. Tesla has also received some approvals to begin testing its self-driving taxi service in Las Vegas. Tesla launched a small AI-trained robo-taxi service in Austin, Texas, in June.

Wedbush analyst Dan Ives believes AI is what has investors excited. “Investors are starting to see through the near-term demand issues for Tesla and recognize that Tesla is in a pole position to be a clear leader in the autonomous market opportunity, with Robotaxis set to scale to 30 to 35 cities in the US over the next year,” he wrote on Sunday.

Tesla sold about 721,000 cars in the first half of 2025, down about 13% year over year. That’s the demand weakness to which Ives is referring.

Selling fewer cars isn’t good news, but AI simply matters more than car sales these days. “We view this autonomous chapter as one of the most important for Musk and Tesla in its history as a company,” added Ives.

He calls AI a $1 trillion opportunity for the company. “Musk is driving this [AI] vision and is now in a ‘wartime CEO’ mode, which is music to the ears of Tesla bulls with this AI Arms Race happening across the tech world.”

The arms race might be an apt analogy. AI is driving the stock market with Magnificent Seven stocks valued at some $20 trillion. ChatGPT parent OpenAI is valued at about $500 billion, while Amazon.com, Alphabet , Microsoft, and Meta Platforms are spending hundreds of billions of dollars a year on AI computing. Some of that is for self-driving cars, Tesla’s territory. Amazon owns self-driving company Zoox. Alphabet controls Waymo.

Ives says Musk is the right leader for Tesla at a time like this, calling him the company’s “most important asset.” A new pay package, worth up to $1 trillion if all performance incentives are hit, should keep Musk at Tesla until 2030 and beyond.

Ives is a Tesla bull, rating shares Buy with a $500 price target for shares, the highest on Wall Street, according to FactSet.

The rest of the Street isn’t as bullish. The average analyst price target is about $318 a share, and 44% of analysts rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.

Through Monday trading, Tesla stock was up about 2% this year and up about 81% over the past 12 months.

Write to Al Root at allen.root@dowjones.com