Tesla (NASDAQ:TSLA) shares have lost roughly 30% of their value in 2026, leaving investors to weigh whether the company's emerging artificial-intelligence businesses can justify a valuation far above what its automotive profits currently support. The stock closed Monday, July 27, at $309.22 after another 1.2% decline.
A $600 price target would imply about 94% upside, meaning Tesla would need to nearly double from its latest closing price. That target, set by then-Wedbush analyst Dan Ives in 2025 and maintained into 2026, is not a fresh response to Tesla's second-quarter results. The latest earnings have made his argument considerably harder to prove, shifting the financial weight back onto the traditional car business.
The $600 target values Tesla as an AI company
Ives' thesis rests on Tesla becoming more than an electric-vehicle manufacturer. When raising his target, he wrote that the company was 'taking major steps in advancing its AI Revolution path,' with autonomy and robotics at the center. The valuation case assigns substantial future value to robotaxi services, Full Self-Driving subscriptions, and the Optimus humanoid robot. Those businesses could theoretically produce higher margins and recurring revenue while expanding Tesla's addressable market beyond vehicle sales.
However, at $309, the market is showing greater skepticism about when that promise will become meaningful cash flow. Reaching $600 would require clearer evidence that Tesla can deploy unsupervised robotaxis at scale, increase paid software adoption, and establish a credible commercial path for Optimus. The target remains possible only under a successful AI scenario. Analyst price objectives are projections, not guaranteed outcomes, and Tesla's history of delayed product timelines makes execution central to any valuation built on distant earnings.
Tesla's investment surge raises the cost of waiting
Tesla reported second-quarter revenue of $28.24 billion, up 26% from a year earlier, but adjusted earnings of 33 cents a share missed expectations. Operating margin narrowed to 1.4%, highlighting the weakness beneath record vehicle deliveries. Capital expenditure climbed to $5.8 billion as Tesla invested in AI computing, robotaxis, batteries, and robot production. Free cash flow turned negative by $1.1 billion, its first quarterly cash burn in more than two years.
As capex more than doubles and free cash flow turns negative, investors are increasingly focused on whether the spending strengthens Tesla's physical-AI advantage, Morgan Stanley analysts led by Andrew Percoco wrote before earnings. Heavy investment is not automatically bearish if it produces profitable businesses. The difficulty is that investors still have limited information about robotaxi economics, Optimus costs, and the timetable for material AI revenue. Tesla expects annual capital expenditure to exceed $25 billion in 2026 and remain elevated, increasing the risk of further cash burn before emerging businesses contribute enough income to offset their development and infrastructure costs.
For context, the broader market has been jolted by AI spending surges from major tech firms, testing investor patience. Tesla's own post-earnings selloff pushed it below $1 trillion in market cap, reflecting the market's reaction to its financials. Meanwhile, other automakers like GM have seen upgrades, highlighting the divergent fortunes in the sector.
This article is for informational purposes only and does not constitute financial advice.
