Tesla (TSLA) shares extended their 2026 decline on Monday, falling another 1.2% to $309.22, marking a year-to-date loss of roughly 30%. The drop came despite broader market gains fueled by easing U.S.-Iran tensions, with the Dow Jones Industrial Average rising and crude oil prices falling nearly 5%.
The electric vehicle maker has been under heavy selling pressure since its second-quarter earnings report released last week. Tesla reported operating profit of about $400 million, far below Wall Street’s expectation of $1.7 billion. The stock tumbled 18% in the week following the report, including a nearly 15% single-day plunge on Thursday.
Investors were disappointed by the lack of major updates on Tesla’s artificial intelligence initiatives—namely its robotaxi network and Optimus humanoid robot. While the company is pivoting away from traditional automotive manufacturing (it ceased production of the Model S and Model X to focus on robots), AI-driven revenue remains distant. The Q2 report showed capital expenditure surging to $5.8 billion, causing free cash flow to flip negative by $1.1 billion, its first quarterly cash burn in over two years. Operating margin narrowed to just 1.4%.
Despite the weak fundamentals, some analysts cling to lofty price targets. Wedbush’s Dan Ives maintained a $600 target, valuing Tesla as an AI company based on robotaxi services, Full Self-Driving subscriptions, and Optimus. That target implies a 94% upside from current levels. However, skeptics point to delayed timelines and uncertainty around when these bets will generate commensurate cash flow. Deutsche Bank analyst Edison Yu cut his price target to $420 from $465 while keeping a Buy rating.
Adding to the noise, merger speculation with SpaceX resurfaced after CEO Elon Musk discussed synergies, but longtime commentator Gary Black dismissed the idea as dilution-heavy and unlikely soon. Meanwhile, SpaceX shares have fallen 32% over the past month.
Morgan Stanley analysts warned that investors are increasingly focused on whether Tesla’s massive spending can build a durable physical-AI moat. With annual capex expected to top $25 billion in 2026, patience is wearing thin.
