Tesla. The name alone evokes images of sleek electric vehicles, cutting-edge technology, and the eccentric genius of Elon Musk. But lately, a sense of unease has settled over Tesla investors. The recent “robotaxi” event, far from inspiring confidence, seems to have exposed a chasm between the company’s lofty valuation and the reality of its ongoing performance.

For years, Tesla has ridden a wave of hype, fueled by Musk’s ambitious promises and the company’s undeniable impact on the automotive industry — often factors enough to overwhelm the critiques of his inconsistency and embarrassing public behavior. 

But the robotaxi event, with its lack of concrete details, regulatory clarity, and a noticeable absence of a more affordable EV model, left Wall Street feeling underwhelmed. Even the touted robot “hand” turned out to be a bit of a parlor trick, seemingly controlled by an off-stage operator rather than the advanced AI it pretended to embody.

This disconnect between hype and reality has triggered a reassessment of Tesla’s stock price. 

Last week’s sell-off, which wiped over $60 billion from the company’s market cap, could be just the beginning. While Tesla’s shares had soared over 70% since Musk began touting xAI in April, bringing its market value to a staggering $760 billion, the recent dip suggests investors are finally starting to prioritize fundamentals over the futuristic promises of an apparent charlatan.

The truth is that Tesla’s earnings have hit a wall. Intermediate-term growth drivers are murky at best. The company’s valuation, once seemingly justified by its disruptive and nearly limitless potential, now appears disconnected from its financial performance. Nearly $600 billion of Tesla’s valuation seems to hinge on speculative ventures like Full Self-Driving, robotaxis and humanoid robots — ventures that are, critics note, quite far from guaranteed to materialize.

Tesla also faces increasing competition in the EV market. Established automakers like GM are ramping up their electric vehicle offerings, putting pressure on Tesla’s sales and margins. This trend, coupled with lackluster demand, has led to a significant decline in Tesla’s operating margins, which fell from 14.6% two years ago to a meager 6.3% in the recent quarter.

In the aftermath of the robotaxi event, investors seem to be returning their focus to the fundamentals of Tesla’s business — and the picture isn’t pretty. With the company trading at 100 times next year’s earnings and generating little to no cash flow, justifying its current valuation is difficult to impossible.

While Tesla’s stock saw a slight recovery in Monday’s pre-market trading, the company still has a lot to prove. The upcoming third-quarter earnings call, after the bell on October 23rd, will be a crucial test. Will it be another exercise in hype, or can Tesla finally deliver some kind of concrete evidence to support its astronomical valuation?

Critics argue that Musk’s penchant for overpromising and underdelivering is catching up to him. His frequent forays into social and political commentary — not to mention his open and large-scale election interference and full-throated embrace of dangerous conspiracy theories — have permanently tarnished the Tesla brand. 

So the questions remain: First, can Musk decouple his own downward trajectory from the brand, or do they remain inseparable? And can Musk regain the trust of investors and steer Tesla back to a path of sustainable growth, despite all indications? It’s a toss-up whether the hype train has finally reached the end of the line, but earnings don’t lie. Stay tuned!