Elon Musk turned Tesla right into a meme stock, says a top economist

In one Guest commentary by Project Syndicate As J. Bradford DeLong, a UC Berkeley economics professor and former Treasury Department official, posted on Wednesday, Musk praised the creation of a historically significant technology company that’s “at the forefront of the transition away from internal combustion engine vehicles.”

Musk’s rocket company SpaceX also shows promise and he has proven to be an efficient coach for engineers working on battery technologies, electric vehicles and rocket science, DeLong added. “Without him, these technologies would not have progressed as far as they have.”

Although Musk has ceaselessly overpromised, he has overdelivered on these fronts, which has helped Tesla’s market capitalization and Musk’s personal wealth skyrocket for the reason that 2010s, DeLong said.

But more recently he has shifted his focus from electric vehicles, charging networks and batteries to social media, artificial intelligence and robotaxis.

While Musk promised last month to speed up plans to introduce a brand new, lower-cost electric vehicle model that Wall Street sees as crucial to his future, he also reiterated his robotaxi ambitions to develop a fleet of autonomous cars.

Meanwhile, Tesla’s surprise layoff of all the Supercharger team sparked concerns concerning the key network and the long run of the industry. This also comes amid slower demand for electric vehicles, weaker sales, broader workforce cuts, a pointy decline in inventory and an exodus of executives.

“But while the over-promising continued, the over-delivering continued,” DeLong wrote. “The fundraiser, cheerleader and coach for teams developing real technology has become a meme stock carnival seller.”

He pointed to last month’s Tesla earnings call, through which Musk cautioned Wall Street analysts to value his company more like a robotics or AI company than a automotive company. In particular, Tesla must be viewed “almost exclusively in terms of solving autonomy” and the potential of applying this to an enormous fleet of vehicles, the CEO added.

But DeLong identified that greater than 80% of Tesla’s first-quarter revenue got here from the automotive business, adding that automotive manufacturing has nowhere near the marginal cost of an IT company that may write code once and run it in all places .

“For any current Tesla shareholders planning to divest their shares in the next few years, everything depends on the company succeeding as a meme stock, and Musk is working diligently toward that goal,” DeLong warned. “Because there are virtually no long-term Tesla shareholders, the market doesn’t particularly care that the company lacks a CEO to try to grow it into a consistently profitable organization.”