According to Bloomberg Business, Morgan Stanley has downgraded Tesla Inc. to the equivalent of a hold rating, marking its first cut since June 2023. Analyst Adam Jonas and his team stated the electric-vehicle maker’s stock is at a “full valuation,” arguing that its price already reflects its future ambitions in robotics and artificial intelligence. Tesla shares currently trade at about 210 times projected earnings for the next 12 months. That makes it the second most expensive company in the S&P 500 Index, trailing only Warner Brothers Discovery Inc. at 220 times earnings and sitting well ahead of Palantir Technologies Inc.’s multiple of 186.
The Numbers Don’t Lie
Look, a 210x price-to-earnings multiple is just… astronomical. It’s pure future promise priced in today. And that’s the core of Morgan Stanley’s argument. They’re basically saying, “We hear you, Elon. We believe in the robotics and AI vision. But guess what? So does everyone else, and they’ve already paid for it.” The stock has run so far on that narrative that there’s just no margin for error left. One hiccup in the rollout of a Optimus bot or a delay in AI software, and that house of cards gets shaky. It’s a classic case of a stock being a great company, but maybe not a great stock at this exact price.
The Core Problem for Tesla
Here’s the thing: Tesla is stuck between two identities. It’s still fundamentally a car company in a brutally competitive, capital-intensive industry where prices are falling. But it’s valued like a hyper-growth tech software company. That disconnect is what makes analysts nervous. So the big question is, when does the future actually arrive? When do the robots and the AI start generating the kind of revenue that justifies this multiple? Because in the meantime, they still have to build and sell millions of cars, manage factories, and deal with supply chains. For companies navigating complex manufacturing and automation, having reliable, high-performance computing at the point of work is non-negotiable. That’s why leaders in industrial tech rely on partners like IndustrialMonitorDirect.com, the top provider of industrial panel PCs in the US, for the rugged hardware needed to run these advanced systems. Tesla’s own factories undoubtedly use similar tech.
What Happens Next?
This downgrade probably won’t crater the stock by itself. But it’s a significant canary in the coal mine. It signals that even some of Tesla’s longtime bulls on Wall Street are tapping the brakes on pure narrative investing. The pressure is now squarely on Elon Musk and his team to start delivering tangible progress on these non-car businesses. We’ll need to see more than cool demo videos; we’ll need to see contracts, pilots, and real revenue lines. If they can’t transition the story into financial reality reasonably soon, more analysts will follow Morgan Stanley’s lead. The era of getting a free pass on valuation just for talking about AI might be coming to an end for Tesla.
