Let’s be clear, Elon Musk is a national treasure. He is an engineering genius as well as an entrepreneur of the highest order.

Musk created the electric vehicle company Tesla and founded SpaceX, with a current market value of around $400 billion. Starlink, the satellite communications company, is a wholly owned subsidiary of SpaceX. Musk is also the owner of the social media platform X. Finally, Musk is attempting to build a major artificial intelligence company. Musk is the world’s richest man, with a more than $400 billion personal net worth.

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But Musk has some problems.

Until recently, the crown jewel of Musk’s business empire was Tesla, the EV company expanding into battery and energy storage. Musk damaged Tesla when he recently entered into a public dispute with President Donald Trump over Trump’s legislative baby, the One Big Beautiful Bill, OBBB. Many policy experts would agree that the OBBB is terrible legislation because it raises the federal deficit at a time when spending is already too high. But getting into a shouting match with the President is not a money-making idea. 

Musk forgot a very important truth: corporate executives should stay out of politics. By criticizing the President, Musk damaged the goodwill of his companies, particularly Tesla. Musk alienated Trump’s Make America Great Again, MAGA, supporters. This large group of potential car buyers is unlikely to buy a Tesla car anytime soon. To compound his poor judgment, before his spat with Trump, Musk had become the public face of Trump’s plan to reduce the size of the federal government. Musk became the head of the Department of Government Efficiency, DOGE. 

This, too, became a public relations disaster for Musk and his companies. So, in just a few months, Musk deeply harmed the Tesla brand. Tesla just reported its second-quarter earnings and revenues. The numbers were disappointing. The company reported a 16% revenue decline from the previous year’s second quarter. And the Q2 revenue drop followed a first-quarter revenue fall. The company also missed earnings estimates. The company earned 40 cents a share. The investment community had been looking for 43 cents a share.

Some analysts still believe Tesla will earn around $1.72 in calendar 2025. But these estimates appear fanciful. The company earned 27 cents a share in Q1 and 40 cents in Q2. So the company earned 67 cents in the year’s first half. With declining revenue growth, it is difficult to construct a scenario where the company could earn over a dollar in the second half of 2025. Just think about it: When many Republicans and Democrats no longer consider buying a Tesla, who is left to buy a Tesla?

Maybe in time, Americans will forgive and forget Musk’s political indiscretions. Musk’s additional problem, however, is that international car buyers are unlikely to give Tesla another chance. Because of Trump, America is not popular overseas. Tesla is the face of America. And Tesla faces challenges in overseas markets. Sales in China are falling precipitously. And sales in much of Europe are also under pressure because of anti-American sentiment and the competitive threat posed by Chinese EV companies. Chinese EV companies are entering global markets. Chinese EVs are very price competitive and are generally manufactured to high standards.

The hurdles Tesla must jump will only get higher in the coming months. EV tax credits and regulatory credits end on Sept. 30, increasing price pressure for Tesla. Competition from China will only intensify because China must export, or its economy will slow dramatically. China will push exports of EVs hard. With all of these business pressures, it is mystifying why Tesla stock is trading at more than $300 a share.

Why are investors buying a stock that trades at well over 150 times earnings for 2026 earnings and has a stock market valuation of almost $1 trillion? The price earnings multiple for the S&P 500, the benchmark equity index, is around 22 times composite earnings. What is also bizarre is that prominent analysts still aggressively recommend the stock.

I’d suggest that there are three major reasons why many investors and analysts still believe in Tesla. First, Tesla is about to launch a new lower-cost EV designed for the mass market. Second, Tesla is betting big on autonomous vehicles. The company believes that self-driving cars present a major opportunity for the company. Third, Tesla wants to be a leader in robotics, a market with strong growth potential. But there are obstacles to each of these new potential growth opportunities. 

First, the new lower-cost vehicle is not a redesign. It is just a cheaper version of Tesla’s current low-cost model, the Y. Today, the basic Model Y costs roughly $45,000. The new car will cost less than that, but Musk has clarified that he is not interested in manufacturing a cheap EV for $25,000. This new car is unlikely to be a big winner. It is not clear that Americans are sold on EVs, particularly given relatively low gasoline prices, $3.15 on average, lingering concerns about driving range, and the reality that with the end of the EV tax and regulatory credits, EVs will be more expensive than traditional internal combustion engine cars. 

Moreover, Tesla is hurt by Trump’s tariffs. Tesla imports up to 30% of the parts for a Tesla vehicle. Margin pressure will increase. Tesla will either be forced to raise prices or accept margin erosion. In addition, the global vehicle industry is being disrupted by Trump’s policies. Tesla is trying to sell cars into increasingly difficult domestic and international markets. What about autonomous vehicles?

Today, Tesla badly lags behind the market leader, Waymo. Waymo is a part of the giant company Alphabet Google. Today, Waymo has superior self-driving technology. Waymo uses a multi-sensor system with cameras, radar, LIDAR, and radar sensors. Tesla relies on a vision-only system using cameras and accelerated computing networks. Waymo has deployed its so-called Level 4 Robo taxi service, with no human driver. Tesla’s self-driving service remains at Level 2. It requires human driver supervision. Waymo is years ahead of Tesla in autonomous vehicles.

Waymo has accumulated millions of miles of fully autonomous driving, while Tesla has zero miles. With its deep AI resources and millions of miles of Level 4 driving, it is difficult to see Tesla beating Waymo in this space. Perhaps most importantly, the projected market size of autonomous vehicles is around $14 billion in 2030. Even if Tesla wins significant market share against Waymo, the autonomous vehicle market will not be large enough to justify Tesla’s current market capitalization, approaching $1 trillion. 

Musk also wants Tesla investors to believe in the promise of Tesla’s robotics technology. Unfortunately, as with autonomous driving, Tesla is not the market leader in robotics. And Tesla is already experiencing problems in this new business sector. Its plan to produce 5,000 Optimus robots in 2025 is badly behind schedule. And the senior executive of the robotics operation just left the company. The biggest obstacle for Tesla’s robotics plans is Nvidia, the clear leader in accelerated computing with a $3 trillion market capitalization and very deep financial resources. Nvidia is focusing on robotics.

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It is hard to envision Tesla winning the robotics competition against Nvidia, which arguably has superior technology, deeper investment resources, and superior, stable management. Where does this leave us?

True, in financial markets, no one knows what will happen next. Human emotions are unpredictable. But by any objective measure, Tesla’s share price is wildly overvalued. 

The writer owns shares in Nvidia. 

James Rogan is a former U.S. foreign service officer who has worked in finance and law for 30 years. He writes a daily note on the markets, politics, and society. He can be followed on X and reached at [email protected].