Key Points
The shine has come off Tesla (NASDAQ: TSLA) in the last few years. At one point, it was considered the definitive growth stock for investors to own, with shareholders betting that founder Elon Musk would take the lead in the emerging electric vehicle (EV) industry, along with other promises in areas like energy storage and self-driving technology.
There was no price too high to pay for owning Tesla. Now, investors have begun to sour on the EV maker, in favor of other artificial intelligence (AI) stocks, including the other Musk-led business, Space Exploration Technologies (SpaceX).
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
In 2026, Tesla shares are down 26% year to date. Here’s what the business needs to do to get the share price moving in the right direction.
Upcoming AI products
Originally, Tesla was a bet on the growth of electric vehicle sales. It showed tremendous growth in scaling up production of its Model 3 and Model Y, increasing from 100,000 total deliveries in 2017 to 1.8 million in 2023. However, since 2023, total vehicle deliveries have stalled, leading to a similar stagnation in the share price.
Musk has pivoted Tesla’s business toward new AI products, while keeping his chatbot and cloud computing ambitions within the xAI/SpaceX corporation. These Tesla AI products include the Cybercab, a two-seat vehicle that will be the flagship of the company’s self-driving taxi network, similar to how Waymo operates today. It also has its standard full self-driving (FSD) software, which is sold on top of vehicles. It is a bit confusing because this is not necessarily fully autonomous software right now, but it has 1.48 million active subscriptions, growing 56% year over year.
Lastly, Tesla is working extensively to embed AI in robotics with its humanoid robot, Optimus. This is in even earlier days than the Cybercab, but the company is working to scale up a factory in California for humanoid robot production as we speak.
Image source: Getty Images.
Margin recovery
Besides revenue stagnation, a major deterioration in profit margins is a key reason why Tesla’s stock price has struggled recently. It had an operating margin of 4.6% over the last 12 months, which is much lower than its historical peak of over 15% and has only declined in the last few years.
Margin recovery will be key to Tesla’s share price recovering. An even higher hurdle for said margin recovery is being erected by guidance for a record $25 billion in capital expenditures this year, roughly double what the business spent in the last 12 months. Capital expenditures will flow through the income statement as depreciation in the future, which will be a headwind to profit margins.
This means that, to improve its profit margin, Tesla will need to grow its revenue significantly to get a return on all this capital spending. It won’t be easy, but Musk has pulled plenty of miracles out of his hat before.
A merger miracle in waiting?
With Tesla’s market cap at $1 trillion, the company will need to show strong growth in its AI-related hardware products for the stock price to start rising again. It can sell more vehicles, but Tesla is already valued at a higher market cap than even the world’s largest automakers. Shareholders are focused on FSD and Optimus, and will be disappointed if these products don’t deliver on the gains Musk promised, despite vehicle deliveries returning to growth last quarter.
Where a miracle may arrive is in a potential merger with SpaceX. During Tesla’s most recentearnings call a Wells Fargo analyst asked Musk about speculation swirling around the prospective deal. Musk said he couldn’t speculate about mergers, but mentioned the growing overlap between the two businesses.
A merger could be a life vest for Tesla at a time when the stock is struggling to meet high expectations, and it seems to have a decent chance of happening over the next few years. I wouldn’t buy the stock solely because of a potential merger with SpaceX, but it does add a nice potential catalyst for anyone holding shares today.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
- Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $581,937!*
- Apple: if you invested $1,000 when we doubled down in 2008, you’d have $57,656!*
- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $400,209!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, available when you join Stock Advisor, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of August 13, 2026.
Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
