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UBS downgraded Tesla<\/a> stock from a \u2018Neutral\u2019 to a \u2018Sell\u2019 rating on Friday, warning that expectations for the EV giant\u2019s core automotive business are deteriorating and its AI investments may not pay off<\/a>.<\/p>\n \u201cWhile TSLA is investing heavily in AI and the tech is making progress, investment is costly, pace of improvement may slow and the payoff is long dated,\u201d analyst Joseph Spak wrote in a note to clients. \u201cGiven the lack of visibility and the risk that growth opportunities materialize on a longer time horizon (or not at all)\u2026[we] downgrade to Sell.\u201d<\/p>\n Spak also said he believes Tesla\u2019s valuation may have been driven too high, too fast by overly optimistic AI-loving investors. Despite lower expectations for growth in its EV businesses, Tesla is trading at over 85 times its forward earnings\u2014compared to around 36 times forward earnings for the wider tech sector.<\/p>\n Tesla has struggled with EV demand issues this year amid rising competition<\/a>, particularly in China, leading its share prices to lag the wider market through the first four months of the year. However, AI opportunities in robotics and self-driving cars, as well as better-than-expected second quarter delivery<\/a> figures helped spark a huge rally in Tesla stock this summer. Shares have surged roughly 70% from their April 19 low to over $249 Friday.<\/p>\n Bullish analysts have long pointed to the potential for trillions in revenue from Tesla\u2019s Robotaxi business as a reason to be optimistic about the company\u2019s future. ARK Invest\u2019s Cathie Wood even argues Tesla shares will surge to $5,000<\/a> by 2030 as the company takes advantage of what will be, in her view, an $8 to $10 trillion self-driving car market in under six years.<\/p>\n Investor enthusiasm took a big hit this week, however, after Bloomberg<\/em> reported<\/a> that Tesla is moving its highly anticipated \u201cRobotaxi Day\u201d\u2014where it promised to unveil robotaxi prototypes\u2014from August to October. Tesla stock sank more than 8% on Thursday, but recovered some of those losses Friday.<\/p>\n Still, Tesla bulls certainly weren\u2019t abandoning Elon Musk and company on Friday. Wedbush tech Dan Ives argued that Tesla\u2019s recent stock price drop after the Robotaxi Day event date change was simply the result of a \u201cknee jerk reaction\u201d from investors who don\u2019t recognize that a slight delay won\u2019t change the long-term potential of Tesla\u2019s self-driving car fleet.<\/p>\n \u201cWe await to hear from Musk but our bullish AI and robotics thesis on Tesla is unchanged if the timing moves from August to October although clearly this is not ideal,\u201d he wrote, maintaining his \u201cOutperform\u201d rating and $300 price target.<\/p>\n<\/div>\n\nSubscribe to the CEO Daily newsletter to get global CEO perspectives on the biggest stories in business. Sign up for free<\/a>.<\/div>\n<\/div>\n