Elon Musk’s $1 Trillion Pay Package Gets a No Vote From Norway. Tesla Stock Is Dropping.

Results of a Tesla shareholder vote on Elon Musk’s pay should be known on Thursday. (Getty Images)

Key Points

• Tesla stock fell 2.8% due to concerns over Elon Musk’s pay award and broader market declines.
• Norway’s $1.9 trillion sovereign-wealth fund voted against Elon Musk’s proposed $1 trillion pay package, citing concerns about its size and dilution.
• Tesla’s robo-taxi service, launched in Austin, Texas, in June, is expected to expand significantly, with 1,000 vehicles in the Bay Area and 500 in Austin by year-end.

Tesla stock closed down Tuesday as nervousness about CEO Elon Musk’s pay battled robo-taxi optimism.

Shares fell 5.2% to $444.26. The S&P 500 and Dow Jones Industrial Average dropped 1.2% and 0.5%, respectively.

Palantir’s performance didn’t do Tesla any favors. Palantir Technologies shares lost 8% after the company reported better-than-expected quarterly results on Monday.

Palantir and Tesla are two of the most expensive stocks in the S&P 500, trading north of 200 times estimated 2026 earnings. Investors are betting both can turn artificial intelligence into earnings, which is why, sometimes, one stock can affect the other.

Pressure on Tesla stock is also coming from Norway. Its sovereign-wealth fund voted against Musk’s $1 trillion pay award, proposed by Tesla’s board in September. Votes will be tallied at Tesla’s annual shareholder meeting on Nov. 6.

“While we appreciate the significant value created under Mr. Musk’s visionary role, we are concerned about the total size of the award, dilution, and lack of mitigation of key person risk—consistent with our views on executive compensation,” the $1.9 trillion fund said in a statement.

The fund’s disclosure introduces a degree of uncertainty into the process. Investors don’t like uncertainty.

It is hard to say what Musk would do if shareholders said no to a pay package that awards him some 425 million incentive-laden shares. He says he needs 25% voting control of Tesla stock to keep AI projects at Tesla, and the award is the vehicle to get his ownership to that level.

Make no mistake, Tesla is valued at roughly $1.5 trillion because of AI opportunities. Tesla’s first AI application is self-driving cars. It launched a robo-taxi service in Austin, Texas, in June. The company’s share price gained 2.6% on Monday, partly because Musk indicated that Tesla was about to expand its business.

According to Musk, “there should be 1,000 vehicles or more in the Bay Area fleet by year-end and 500 or more in Austin,” wrote Deutsche Bank analyst Edison Yu on Monday. “We estimate there are only 150 to 200 vehicles now, suggesting a large ramp-up in the next few months.”

He rates Tesla shares Buy and has a $470 price target for the stock.

It will be a nerve-racking week for investors. Wall Street, for the most part, expects a majority of Tesla shareholders to vote in favor of Musk’s pay. “Expect [a] big green light,” wrote Wedbush analyst Dan Ives, adding the package “was the smart move by the Board to lay out these incentives/pay package at this key time as the biggest asset for Tesla is Musk.”

Ives rates Tesla shares Buy and has a $600 price target for shares.

Coming into Tuesday trading, Tesla stock was up about 16% so far this year and up 93% over the past 12 months.

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