What Happened?
Shares of electric vehicle pioneer Tesla (NASDAQ: TSLA) fell 5.5% in the morning session after the stock's negative momentum continued as reports surfaced of a dramatic drop in its China sales for October.
The electric vehicle maker’s sales in China plunged to 26,006 vehicles, a three-year low that represented a 36% drop from the previous year and a 63.6% crash from September. This sharp decline caused Tesla's market share in the country to shrink from 8.7% to just 3.2%. The competitive pressure was highlighted by reports that competitor Xiaomi sold more vehicles in October than Tesla's combined sales of the Model Y and Model 3.
Separately, the broader U.S. stock market declined amid investor caution and a pullback in technology stocks.
The main story? Investors are cashing in on a good run and feeling a bit cautious. After a fantastic run, many of those high-flying AI and technology stocks saw investors take profits: selling shares to lock in their gains. This is often called a "market rotation." Money is moving out of the red-hot tech sector (which some worry has become too expensive) and into other parts of the market that investors may currently deem more stable or reasonably-priced.
There's a secondary reason for the cautious mood: The long government shutdown came to an end. Though it's typically interpreted as good news, it also means a flood of delayed economic reports will be released. For weeks, investors were "flying blind" without key updates on the economy's health, like inflation data and the jobs report. In typical "sell the news" fashion, investors may also be taking profits and selling in anticipation that the new data would potentially give the Federal Reserve reasons to slow or even pause future rate cuts.
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What Is The Market Telling Us
Tesla’s shares are extremely volatile and have had 45 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 9 days ago when the stock dropped 3.3% on the news that Norway's sovereign wealth fund, a major institutional investor, announced its plan to vote against CEO Elon Musk's proposed $1 trillion compensation package.
The fund cited concerns over the total value of the award and shareholder dilution. This marked the first public opposition from a major investor ahead of the shareholder vote. The negative news was compounded by other challenges for the company. Tesla also issued two recalls for its Cybertruck, affecting nearly 70,000 vehicles due to issues with overly bright lights and loose light bars. Additionally, the company faced a new lawsuit over a fatal crash involving a Model S, where it was alleged the doors failed to open.
Tesla is up 6.4% since the beginning of the year, but at $403.44 per share, it is still trading 15.9% below its 52-week high of $479.86 from December 2024. Investors who bought $1,000 worth of Tesla’s shares 5 years ago would now be looking at an investment worth $2,963.
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