Tesla’s share price dropped over 3% in after-hours trading, even after posting record car deliveries in the third quarter. Revenue reached $28.09 billion, exceeding expectations, but net income was only $1.77 billion, below the estimated $1.9 billion. Despite a better-than-expected gross margin of 18% and $4 billion in free cash flow from clearing inventory, reactions were mixed. Tesla has cash reserves of $41.6 billion and does not plan to pay dividends or buy back shares. Elon Musk advises looking at Tesla as a group of innovative projects that include automotive, AI, and energy. The company also makes AI chips in partnership with TSMC and Samsung. It’s facing a $400 million hit from tariffs, rising capital costs, and higher AI division pay. The company’s guidance for new Model Y variants aims to offset the decline in EV credits in the U.S. Tesla is making significant investments in AI for its data centers using Nvidia GPUs and is excited about expanding self-driving Robotaxis to several cities, despite potential regulatory challenges ahead. AI and humanoid robots are also areas of focus, even as net income falls short and capital expenditures rise. Disappointments in tech earnings, like Netflix’s 10% drop, set a tough standard for upcoming reports from other tech companies. While some see promise in Tesla’s vision, many remain skeptical in the current economic climate. The gap between record car deliveries and lower net income is causing uncertainty. Strong cash flow meets market doubts about future projects, suggesting we should expect more volatility in the coming weeks. Options prices will reflect this situation, making it costly to hold positions but potentially rewarding for those who predict the next major shift correctly. The market is currently punishing companies with high spending on growth, as seen with Netflix’s recent drop. Tesla’s operating expenses rose 50% year-over-year, raising concerns for investors focused on immediate profitability. This makes it sensible to consider further downside risk, especially if the stock dips below significant support levels from earlier in the month. Data from the market suggests caution. The CBOE Volatility Index (VIX) is around a nervous 24, well above its historical norm. For Tesla, the 30-day implied volatility is at 68%, indicating the options market expects a big price shift. Any more weak earnings from major tech companies reporting next week could add to the pressure. Conversely, the $4 billion in free cash flow serves as a solid safety net, limiting a purely bearish outlook. The main driver for a possible quick jump in stock price remains the rollout of Robotaxis, with a crucial regulatory decision from California’s DMV on autonomous vehicle permits expected by early December. A surprise approval could lead to a significant rally, making speculative, short-term call options a high-risk, high-reward strategy. A similar volatility pattern occurred in 2022 and 2023 when the market questioned heavy spending on new Gigafactories. The stock fluctuated for months before the long-term growth potential became clear, rewarding patient investors. This historical example suggests that while the next few weeks may be turbulent, the narrative can change quickly with a single positive event. In summary, Tesla is now more influenced by its AI ambitions than its car business. Keep an eye on regulatory news and updates about the Robotaxi rollout in 8 to 10 metro areas, as these will be the key factors affecting stock price. Any delays or regulatory issues could present the next trading opportunity for those expecting a downward shift.

here to set up a live account on VT Markets now