Tesla Shares Plummet Amid Investor Concerns Over Profit Margins and Future Prospects

Tesla's shares fell by 12%, losing almost $100 billion in market value, following CEO Elon Musk's comments on future products like humanoid robots and driverless taxis. The electric car maker's quarterly profit margin hit a five-year low, leading to a widespread sell-off in the stock market.

Tesla shares plunged by 12% on Wednesday, wiping out nearly $100 billion in stock market value. This drop followed CEO Elon Musk's discussion on future products such as humanoid robots and driverless taxis, failing to alleviate investor concerns over shrinking profit margins. The electric vehicle maker reported its lowest quarterly profit margin in five years, with earnings per share missing estimates for the fourth consecutive quarter.

This was Tesla's largest one-day percentage drop since 2020, reducing its market capitalization to under $700 billion, from over $1 trillion in 2021. Despite remaining the world's most valuable car manufacturer, the company's valuation hinges on investor expectations of substantial future profits from yet-to-launch products like robotaxis and humanoid robots.

Jeff Osborne from TD Cowen remarked that Musk's enthusiasm mainly involved products that currently do not exist. Tesla's disappointing results and a report from Alphabet citing higher capital expenditures triggered a significant sell-off on Wall Street. Alphabet's stock declined almost 5%, contributing to the market turmoil. Tesla has faced declining EV deliveries for two consecutive quarters and has yet to introduce a lower-cost model, prompting consumers to switch to competitors like China's BYD. To boost sales, Tesla has resorted to price cuts and incentives, further impacting profit margins.

(With inputs from agencies.)