Tesla’s Valuation Conundrum: Core Business Questions Cloud AI Ambitions

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Midweek trading pressure mounted on Tesla from multiple fronts. A contradictory picture has emerged, shaped by weaker European sales figures, disruptive political headlines, and a cumbersome new "Space-AI" initiative. As CEO Elon Musk announces the revival of the Dojo supercomputer project, investors are increasingly scrutinizing the stability of the electric vehicle division that forms the company's core.

While the broader technology sector faced headwinds, Tesla contended with its own set of challenges. The primary burden came from a significant 27.8% year-over-year plunge in European vehicle sales for 2025. The German market was hit particularly hard, registering a dramatic 48.4% decline in deliveries. Globally, Tesla shipped 1.64 million vehicles in 2025, down from 1.79 million the previous year, signaling that demand growth is no longer as effortless as in past periods.

Further unease was sparked by Musk himself. A social media poll asking whether he should acquire budget airline Ryanair—a company valued at approximately $36 billion—was widely interpreted as a potential distraction from operational execution. Many shareholders recall the Twitter/X acquisition, viewing such signals with caution.

A macroeconomic shock added to the selling pressure. Remarks from former U.S. President Donald Trump concerning potential new tariffs against NATO allies triggered a broad tech selloff on January 20. The Nasdaq Composite fell 2.4%, pulling highly volatile names like Tesla lower in its wake.

Dojo's Return Faces a Skeptical Audience

Against this backdrop, Musk announced the restart of the Dojo3 supercomputer project via social media platform X late Tuesday. This represents a strategic reversal, as the project was halted and its team disbanded in August 2025. Musk stated that the internal AI5 chip design is now in "good shape," aiming to reduce Tesla's reliance on external hardware suppliers like Nvidia.

The renewed focus for Dojo3 is "space-based AI compute." Plans involve tight integration with SpaceX's Starlink network to process data directly in orbit. The long-term vision is to shift computational power to space, leveraging solar energy to circumvent the limitations of terrestrial power grids.

A Widening Gulf Between Valuation and Fundamentals

The current situation highlights a growing disconnect between Tesla's market valuation and its automotive business performance. Commanding a market capitalization of roughly $1.46 trillion, the company's shares trade at a price-to-earnings ratio exceeding 300 based on trailing twelve-month earnings. This premium valuation increasingly rests on future visions for the humanoid "Optimus" robot and full self-driving (FSD) technology, rather than traditional car sales.

The competitive landscape has intensified markedly. Chinese rival BYD officially surpassed Tesla in global electric vehicle deliveries during 2025, gaining market share as Tesla's portion contracted. An aging model lineup and pressure on profitability compound these issues. The operating margin contracted to 5.8% in Q3 2025, down from 10.8% a year earlier. Competitors are capitalizing on gaps left by Tesla's price cuts and narrower model variety.

Technical indicators are flashing warning signs. The recent correction has pushed the share price notably below the 50-day moving average of 414.07 euros and more than 19% below its 52-week high of 485.56 euros. An RSI reading of 73.7 points to an overbought yet jittery market environment. Historically, a breach of key moving averages has often been interpreted by institutional trading algorithms as a shift from an upward to a downward trend.

Upcoming Earnings as a Crucial Stress Test

All eyes now turn to the next major catalyst: Q4 2025 results, scheduled for release on January 28, 2026. With quarterly deliveries of 418,277 vehicles missing expectations of 426,000 units, Tesla's guidance for the current year will be critically important.

The focus will center on three key areas:
- The scale of continued investment in projects like Dojo3, Space-AI, and robotaxis
- Management's strategy for stabilizing margins amid slowing momentum in the auto business
- The intended medium-term role of the core automotive division relative to new business fields

Analysts currently maintain a neutral average rating, with a mean price target slightly below current trading levels. The 2026 outlook provided next week will likely determine whether the market continues to support Tesla's lofty valuation premium or subjects the stock to more intense scrutiny in the first half of the year.