Tesla Stock Faces Downgrade Amid Musk-Trump Dispute; Can Robotaxi Rollout Boost Investor Confidence?

Tesla’s stock experienced a notable downgrade this week, coinciding with a public dispute between CEO Elon Musk and President Donald Trump, which contributed to a sell-off among investors.

The tension between the two high-profile figures has added an element of uncertainty to the company’s outlook, just as Tesla prepares for the highly anticipated launch of its robotaxi service.

On Monday, Baird analysts downgraded Tesla’s stock from “outperform” to “neutral,” while maintaining a price target of $320—roughly an 8% upside from current levels. The firm cited that much of the recent price gains, driven by excitement over the robotaxi rollout, have already been priced into the stock. Analysts also pointed out that Musk’s predictions about the rapid scale-up of the robotaxi service may be overly optimistic. Furthermore, Musk’s contentious ties with Trump have introduced additional risk, complicating the company’s near-term prospects.

Tesla is expected to launch its limited robotaxi service in Austin, Texas, potentially as soon as Thursday, although the company has not officially confirmed a date. Musk has indicated plans to deploy about 10 robotaxis in the first week, with ambitions to expand to around 1,000 units in a few months. These autonomous vehicles will operate with human supervision and within geofenced areas of Austin.

Despite the enthusiasm surrounding the robotaxi, Tesla’s vehicle sales in China have declined, with data from the China Passenger Car Association showing an 8% drop year-to-date through May compared to the previous year. Sales in May were down 30% year-over-year, a stark contrast to the strong sales Tesla experienced in China earlier in 2025.

Tesla’s stock price has struggled recently, falling about 27% year-to-date and losing nearly 40% from its all-time high. The sell-off last week followed a sharp 14.7% drop amid Musk and Trump’s online clash, which included Musk accusing Trump of ties to Jeffrey Epstein’s investigation files and Trump threatening to cancel Musk’s government contracts. Although shares bounced somewhat after the feud appeared to cool, market analysts warn the situation has created significant uncertainty.

Adam Jonas, analyst at Morgan Stanley, noted that the spat “could potentially (temporarily) alienate multiple sides of the political spectrum,” adding to the risks Tesla faces. Similarly, Argus Research downgraded Tesla’s rating from buy to hold, citing concerns that the stock is reacting to “non-fundamental events” rather than core business performance. The expiration of electric vehicle tax credits and increasing competition from other automakers like Ford and General Motors also weigh on the company’s near-term outlook.

CFRA analyst Garrett Nelson highlighted the risk of a “sell the news” reaction following the robotaxi launch, given the recent run-up in Tesla shares driven by expectations for the new service. Nelson also pointed out ongoing challenges including market share losses in China and Europe.

Nonetheless, despite these headwinds, Baird analysts consider Tesla a “core holding” over the long term. They acknowledge the significant opportunity presented by the robotaxi and robotics sectors but advise caution given current uncertainties. Cathie Wood’s ARK Invest has similarly reduced its Tesla holdings in recent weeks, reflecting a more cautious stance among institutional investors.

Investor’s Business Daily, CNBC, the Telegraph, and Market Watch contributed to this report.