Why Tesla Is the Most Expensive—and Shorted—Stock in the Mag 7

Coming into Thursday trading, Tesla stock was down about 14% year to date, but up 52% over the past 12 months. (SERGEI GAPON/AFP via Getty Images)

Key Points

About This Summary

• Tesla stock rose in Thursday trading.
• Tesla has roughly 80 million shares sold short, about 3% of shares, higher than the Mag 7 average of about 1%.
• Tesla’s valuation is high at 140 times estimated 2026 earnings, making it a controversial stock.

Tesla stock rose Thursday. It’s the most expensive, and heavily shorted, stock among the Magnificent Seven.

Shares of the electric-vehicle maker rose an impressive 6%, closing at $368.81. The market helped some. CPI data were in line with expectations, solidifying investors’ belief that rate cuts were coming. Car companies like lower rates. Cars are generally financed. The S&P 500 and Dow Jones Industrial Average were up 0.9% and 1.4%, respectively.

Closing above $368 is the highest close since February. There wasn’t Tesla-specific news to pin gains on. No analyst reports or upgrades.

Barid analyst Ben Kallo, however, published his short interest update for companies he covers on Wednesday. Short sellers borrow stock they don’t own and sell it, hoping to buy it back to repay the stock loan at a lower price in the future.

About 80 million shares of Tesla have been sold short, or about 3% of the shares available for trading. That’s higher than the roughly 1% average short interest in the rest of the Magnificent Seven stocks, but Tesla’s short interest has been stable in recent months, with no significant increase or decrease.

One reason for higher short interest is valuation. Tesla is the most expensive of the Mag 7 by a long shot. It trades for about 140 times the estimated calendar year 2026 earnings. The other six trade for closer to 29 times.

That valuation is one reason Tesla is a controversial stock on the Street. The difference between top and bottom analyst price targets is about $360, or roughly 100% of the current price. That ratio for Nvidia is closer to 50%.

Tesla eked out a 0.2% gain on Wednesday, following Oracle’s blowout quarterly results that sent its shares up 36%. Investors weren’t ready for how big Oracle’s AI business is getting. Contracted backlog rose to $455 billion at the end of August, up from just $138 billion at the end of May.

Tesla is seen more as an AI play than a car company by bullish investors and analysts. It’s using AI computing to train cars to drive themselves and train humanoid robots to do useful tasks. Tesla hopes to start selling significant quantities of robots in 2026, according to CEO Elon Musk.

Coming into Thursday trading, Tesla stock was down about 14% this year but up 52% over the past 12 months.

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