Tesla Stock Drops as Elon Musk Bids for OpenAI

Shares of Tesla (TSLA) slid -6.32% on Tuesday, 11 February, taking the stock down to a fresh two-month low of $327.33. Tuesday’s decline marked an acceleration of an already steep decline, with the stock falling five days in a row, leaving it well down from its record high on 18 December 2024 of $488.54.

The decline in the TSLA share price comes at the same time Tesla CEO Elon Musk is leading a consortium of investors in a takeover bid of $97.4 billion for ChatGPT-owner OpenAI. Some analysts are viewing the bid as a distraction from Tesla’s challenges.

Tesla Stock Performance Chart

Tesla stock is undergoing a large correction from the huge rally of November through December last year. 

On 6 November, the day after the US election result, the stock broke out of a 4-month trading range with a gap higher, closing at $251.44. It went on to surge 94% to hit the record high of $488.54.

The current price decline has now unwound much of that rally, with the price back to where it was 2 days after the post-election breakout.

*Past performance does not indicate future results

Why Is Tesla Stock Falling?

Elon Musk’s Distractions

The OpenAI bid adds to a long list of projects that could serve to distract the Tesla Chief Executive from running the electric vehicles (EVs) company.

The unsolicited takeover bid of $97.4 billion for Sam Altman's OpenAI values the company at a 38% discount to its last capital raise in October 2024, making it less likely to succeed than if the bid offered a premium.

Some investors are worried that Musk’s increasing political ambitions in alignment with US President Donald Trump, including heading up DOGE (the Department of Government Efficiency) risks alienating some Tesla customers. (Source: Investors.com)

Q4 Earnings

Although Tesla stock initially popped after reporting Q4 earnings on 29 January, the shares have subsequently dropped as investors possibly began to re-evaluate the results. Investors cheered line items such as record deliveries and the Model Y being the best-selling vehicle among all vehicles globally in 2024. Since then, it's possible the falling margins, thanks to lower average selling prices (ASPs) have contributed to a change in sentiment.

BYD Competition

EV China-based competitor BYD (1211.HK) saw its shares hit a record high on 11 February after announcing it partnered with DeepSeek to deploy the AI into all its new vehicles. 

The company also announced late Monday that it was releasing an assisted driving system called “DiPilot” for its cars. This system will compete directly with Tesla’s “Full-Self Driving,” which has yet to receive approval in Beijing.

Trump’s Steel Tariffs

President Trump's new tariffs on steel and aluminium, essential raw materials for Tesla, are likely to increase the company's costs. A possible trade war with China presents a risk, as Chinese companies supply 40% of Tesla's battery materials.

Conclusion

According to some, Tesla’s stock could continue to decline, reflecting concerns over Elon Musk’s OpenAI bid, rising competition from BYD, and falling margins due to lower ASPs. Macroeconomic risks, including Trump's steel tariffs and potential trade tensions with China, add further pressure. 

However, Tesla’s strong delivery numbers, current leadership in EVs, and long-term growth potential could support a rebound if investor confidence stabilises.

Only time will tell what lies ahead.