Tesla investors warned to sell shares

As mentioned a few months ago in an article, the EV market is looking like a dead-end industry. We’re just not seeing the infrastructural growth to support full electric domination. Since the world now realizes that the power to recharge the vehicles is not green, the environmental buzz has faded, and Tesla is now getting more memes than unit sales. And then there’s the earning report.

Tesla's second-quarter earnings

During Tesla's second-quarter earnings call, Musk made several striking comments. Despite Tesla's fame for its EVs, Musk reiterated that he views the company primarily as an AI and robotics business. Tesla's main goal in this area is developing advanced autonomous-driving technology, which has long been a hot topic among investors and Wall Street analysts.

However, after years of heavy investment in research and development, Musk is facing increasing scrutiny about Tesla's progress in self-driving technology. In a notable statement, Musk said, "I recommend anyone who doesn't believe that Tesla will solve vehicle autonomy should not hold Tesla stock. They should sell their Tesla stock."

The reality check

Musk's direct approach may be startling, but it reflects a clear message: If investors doubt the feasibility or potential of autonomous driving, they should reconsider their investment in Tesla. This level of honesty from a CEO is rare, and it served as a wake-up call for many investors.

Tesla's autonomous-driving software, known as full self-driving (FSD), could drive significant growth if it outperforms other autonomous-driving platforms. This could attract new EV buyers and support Tesla's ambitious Robotaxi initiative—a fleet of self-driving cars aimed at revolutionizing ride-hailing, delivery, logistics, and rental car markets.

However, there are significant risks associated with FSD. The scalability of FSD remains uncertain, as consumer demand for self-driving cars is still unproven. The Robotaxi project has faced delays, with a promised preview postponed, adding to skepticism about FSD's readiness for mass adoption.

Cost is another major concern. Developing self-driving technology requires substantial investment in engineering and quality assurance. Currently, Tesla is heavily dependent on Nvidia's GPUs for training its FSD models, resulting in significant expenses.

TSLA technical analysis

• 50-day SMA: Currently at $209.38. TSLA is also trading below this shorter-term moving average, reinforcing the bearish sentiment in the near term.

1. Relative Strength Index (RSI):

• 14-day RSI: Currently around 37. This indicates that TSLA is approaching oversold territory, but not quite there yet. A reading below 30 would typically signal an oversold condition, suggesting a potential bounce.

The combination of TSLA trading below both its 200-day and 50-day SMAs, along with a declining RSI, suggests a bearish outlook for the stock in the near to medium term.

The RSI approaching oversold levels could indicate a potential short-term bounce, but the overall trend remains bearish until the stock can reclaim its key moving averages.

Tesla's most recent earnings report was on July 23, 2024. It's important to consider how the market reacted to the earnings and any subsequent news or developments that could impact the stock's price.

Overall market sentiment and news related to Tesla or the electric vehicle industry can also influence the stock's price movement.

Tesla challenges

Given these challenges, Musk's advice to those skeptical about autonomous driving is worth considering. If you’re not confident in Tesla’s ability to scale its self-driving technology and execute its ambitious plans, selling your shares might be the right move.

As investors, it’s crucial to consider the broader context. Successful companies often evolve beyond their initial products. Tesla is transitioning from an EV and energy storage company to an AI-driven enterprise. Musk's comments should be seen as clarifying Tesla's future direction rather than a warning.

Conclusion

As a long-term Tesla shareholder, I have long believed in the company’s AI and robotics vision. Musk’s forthrightness during the earnings call reinforces my view of Tesla as an exciting AI opportunity that is misunderstood and underappreciated.

Before making any investment decisions, it's wise to carefully consider Musk's guidance and the company’s strategic direction. Tesla’s evolution into an AI and robotics powerhouse represents a significant shift, and aligning with this vision is crucial for potential investors.