Elon Musk's Tesla Is Now A 'Meme Stock,' Says Economist: 'The Market Does Not Particularly Care'

Elon Musk‘s Tesla Inc. TSLA has been labeled a “meme stock” by a renowned economist, who believes that the company’s success is now more about Musk’s promises than its actual performance.

What Happened: UC Berkeley economist J. Bradford DeLong suggested that Tesla’s market success is now largely dependent on Musk’s ability to keep making promises, regardless of the company’s actual delivery, the economist wrote in an op-ed for Project Syndicate.

“From the standpoint of its suppliers, employees, and customers, it is a source of income and production,” he said. “And from the standpoint of Wall Street speculators, it is a bouncing ball in a roulette wheel: a tech-bubble casino play.”

DeLong, in an op-ed, pointed out that Musk, after unlocking his entire pay package in 2018, has been promoting ideas that the company has yet to deliver on, such as full self-driving, humanoid robots, and an artificial intelligence supercomputer.

“For all the current Tesla shareholders planning to offload their holdings in the next couple of years, everything hinges on the company succeeding as a meme stock, and Musk is diligently working toward that goal,” DeLong argued.

“Since there are virtually no long-term Tesla shareholders, the market does not particularly care that the company lacks a CEO who is trying to build it into an enduring profit-making organization,” he added.

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He also noted that Musk’s recent earnings commentary, in which he suggested that Tesla should be considered an AI or robotics firm, contradicts the company’s first-quarter results, where “automotive revenues” made up more than 80% of the sales.

Despite the concerns raised by DeLong and others, Tesla’s recent earnings commentary has boosted confidence on Wall Street, following a period of uncertainty around EV demand and executive controversies.

Why It Matters: The economist’s remarks come in the wake of Tesla’s first-quarter financial results, which saw a 9% year-over-year revenue decline, missing Wall Street estimates. Despite this, Musk’s optimistic commentary during the earnings call triggered a 13% surge in after-hours trading.

Meanwhile, Musk’s focus on AI and robotics has been evident in his recent comments. After Amazon’s AWS revenue surpassed that of 466 S&P 500 companies, Musk expressed his astonishment at the sheer size of the cloud computing business.

Meanwhile, Tesla’s rival, Stellantis N.V. STLA, announced a 12% decrease in net revenues and a 10% reduction in consolidated shipments in the first quarter, largely due to volume, mix, and foreign exchange challenges.

Read Next: 29-Year-Old Tesla Worker Who Got Fired Says He Slept In Parking Lot, Showered At Factory And Ate Microwaved Dinner: ‘Sacrificed A Lot For The Company’

Image Via Shutterstock

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Posted In: Analyst ColorEquitiesNewsGlobalMarketsElon MuskJ. Bradford DeLongJeff BezosKaustubh BagalkotemobilityUC Berkeley
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