I’ve watched Tesla for years. Genuinely admired what they’ve built. And I’ve never bought a single share.
This week is a pretty good reminder of why.
The Numbers Are Staggering
Tesla just shed roughly $199 billion in value during its biggest back-to-back selloff since September 2020. Elon Musk personally lost about $50 billion in two days — the largest decline in the history of the Bloomberg Billionaires Index. That’s not a typo. Fifty billion dollars in 48 hours.
The catalysts? A messy cocktail of Musk’s Twitter poll asking followers whether he should sell 10% of his holdings, his brother offloading shares the day before the tweet (which raises its own questions), and a broader momentum shift that’s been building for weeks. Tesla’s been sliding, and this week it accelerated hard.
Maybe now I’ll finally buy some?
Nah. Probably not.
The Overvaluation Problem I Can’t Get Past
Here’s the thing — I’ve always felt Tesla was way overvalued. And even after this massive selloff, I STILL think it’s way overvalued. The stock trades at multiples that would make any traditional valuation analyst break out in hives. We’re talking about a car company — a brilliant, innovative car company, sure — but a car company trading at a price-to-earnings ratio that makes the entire rest of the auto industry look like it’s being given away for free.
I get the bull case. Tesla isn’t just a car company, it’s an energy company, an AI company, a battery company, a solar company. Fine. Price some of that in. But the current valuation prices in a future where Tesla essentially wins everything, everywhere, simultaneously. That’s not investing — that’s faith.
And I guess that’s the drawback of assets with real-world value. When you’re building actual cars in actual factories and shipping them to actual customers, eventually the numbers have to connect to reality. Unlike, say, a meme coin where the disconnect between price and utility is the whole point.
What This Tells Us About the Broader Market
What I find more interesting than Tesla’s specific slide is what it reveals about where we are in the cycle. We’re starting to see institutional flows that look a lot like big players repositioning for 2022. TWAP flows — time-weighted average price orders — are showing up, which typically signals institutions quietly building or unwinding large positions over time rather than making splashy moves.
That matters. When institutions start thinking about next year, they’re thinking about rate environments, inflation trajectories, and sector rotation. And the calculus is shifting.
Here’s a distinction I think more people should be making: not all risk assets are created equal. Crypto — specifically the major protocols — arguably behaves more like digital gold at this point, a hedge against monetary debasement. But the metaverse tokens, the altcoins tied to specific technology platforms? Those behave more like tech stocks. And tech stocks historically don’t love higher rate environments.
If rates are going up — and everything suggests they will — the stuff that trades on future cash flow projections gets hit hardest. That’s growth tech. That’s Tesla. And potentially, that’s a lot of the speculative end of crypto too. The blue-chip crypto assets might actually hold up better than people expect, while the long-tail altcoins could face serious headwinds.
The Musk Variable
There’s another layer here that I think investors consistently underweight: key-man risk. Tesla’s valuation is inseparable from Musk himself. His Twitter poll wasn’t a thoughtful capital allocation strategy — it was a billionaire being a billionaire on social media. And it moved nearly $200 billion in market cap.
That’s not a feature of a mature, de-risked investment. That’s a single point of failure dressed up as visionary leadership. When one person’s weekend tweet can wipe out the GDP of a mid-sized country from your portfolio, you don’t have an investment thesis — you have exposure to someone’s mood.
I’ve never shorted Tesla either, to be clear. The volatility cuts both ways, and betting against a company with that kind of cultish following is a great way to blow up your account on a random Tuesday. The smart play, as I see it, has always been to just.. stay out of the way.
Where I’m Actually Looking
I’d rather put capital into assets where I can develop a genuine informational edge — where I understand the technology, know the teams, and can assess real-world traction independently of what the crowd thinks. That might be early-stage crypto protocols with strong fundamentals and serious institutional backing. It might be DeFi plays where you can actually see the on-chain mechanics working.
The point is: conviction should come from understanding, not from momentum. Tesla’s had incredible momentum for years. This week is a reminder that momentum is not the same thing as value.
The Takeaway
If you’re sitting on Tesla gains, this week is worth thinking about seriously. Not panic-selling — but genuinely asking yourself whether your thesis is about the company or about the stock price going up. Those are very different things.
And if you’ve been waiting for a dip to buy in? A $199 billion haircut is certainly a dip. But a stock can be cheaper than it was last week and still be expensive. I think Tesla falls into that category.
I’ll keep watching from the sidelines. Respectfully.
