The case for having financial faith in Elon Musk's companies basically comes down to this: he's made people a ton of money before, and so he can and will again. And to his credit, he assuredly has, at least with Tesla's share price over the years. But as his unprecedented compensation package faces a shareholder vote, not all investors are happy with the current state of things.
That kicks off this midweek edition of Critical Materials, our morning roundup of the latest industry news around tech, the electrification race and more. Also on deck: the latest weirdness between Tesla, Nvidia and the social media platform formerly known as Twitter, and General Motors' CEO gets questions about the company's EV commitments.
30%: 'The Stock Works Best When There Are Auto Company Fundamentals'
It's worth noting yet again that Tesla's upcoming annual shareholder meeting and vote on Musk's $56 billion pay package won't actually reverse a Delaware court decision that put the kibosh on it. But Musk and Tesla leadership seem to hope it'll move things in that direction.
However, investors are far from unanimous here. While plenty of retail investors (including vocal, paying, blue-check X subscribers) are behind the idea that Musk is the primary driver of $TSLA's value, several big institutional investors don't agree.
Today, Reuters reports that many early $TSLA bulls are even cashing out:
The company's shares are down nearly 30% this year and have fallen by more than 50% since their 2021 high, wiping out some $600 billion in market value as CEO Elon Musk has struggled with fierce competition and falling sales. Tesla's first-quarter results missed analyst expectations, though Musk said the company would release new models in 2025 that would be more affordable.
"It started to feel like the fundamentals were becoming detached from reality," said John Belton, a portfolio manager at Gabelli Funds whose firm sold its entire stake of 65,900 shares - acquired in early 2022 - in the first quarter of the year. “We think the stock works best when there are auto company fundamentals that justify the stock price.”
Tesla's nearly 14-fold increase in its stock the last five years has conditioned investors to hold on during periods of adversity and accept valuations that are more in line with technology companies than carmakers. This time however, even some of the company's diehard believers have become skeptical that the same kind of expansion lies ahead and think Tesla's shares have become too risky. Tesla did not respond to a request for comment on this story.
Or longtime Tesla superfan Ross Gerber, also turned off by Musk's various antics and the decline in value lately:
Ross Gerber, whose Los Angeles-based firm, Gerber Kawasaki Wealth & Investment Management, bought 500,000 shares more than a decade ago, has been selling steadily this year. "I think the story is over, is the best way to say it," said Gerber, who has whittled his position down to around 300,000 shares.
Gerber’s complaints range from Tesla’s public relations department, which he believes receives insufficient funding, to what Gerber calls Musk’s distractions by political and cultural issues.
That's a shocking outcome if you knew what some of these folks were saying about Tesla just a few years ago. And many have issues with the fact that Musk seems focused on X, the culture wars, AI and robotaxis—not the business of selling EVs in an increasingly competitive global market.
Granted, Tesla still has lots of big supporters too, like Ark Invest founder Cathie Wood and others. But the cracks are starting to show more than ever lately.
60%: Tesla's Nvidia Chips Order Went To X Instead
Speaking of AI, here's a spicy one, via a great scoop yesterday from CNBC's Lora Kolodny. It seems a big order for $500 million worth of Nvidia's processors for AI set for Tesla actually went to X (formerly Twitter) instead.
From CNBC:
On Tesla’s first-quarter earnings call in April, Musk said the electric vehicle company will increase the number of active H100s — Nvidia’s flagship artificial intelligence chip — from 35,000 to 85,000 by the end of this year. He also wrote in a post on X a few days later that Tesla would spend $10 billion this year “in combined training and inference AI.”
But emails written by Nvidia senior staff and widely shared inside the company suggest that Musk presented an exaggerated picture of Tesla’s procurement to shareholders. Correspondence from Nvidia staffers also indicates that Musk diverted a sizable shipment of AI processors that had been reserved for Tesla to his social media company X, formerly known as Twitter.
Some folks are cool with this, believing all the Musk companies are one big related ecosystem and what happens at one can benefit the others. That's a very nice thought to have. But in reality, these are two separate companies—one publicly traded, one not—and the overlap will certainly infuriate at least some Tesla investors waiting on that big AI payday they've been promised.
Musk later responded with his legendary wit by posting "Lora 'Liar' Kolodny" on X, but he did that after admitting the story was true. And to date, the CNBC story has no "community notes" on X to crowdsource doubts about its veracity.
90%: Barra Stands Firm On EVs But Settles In For The Long War
In retrospect, too many established automakers probably took a "How hard can this be?" approach to a long-term electric vehicle transition. I outlined a bunch of reasons why that's happening in a story yesterday about Hyundai and Kia (which are doing great in the EV department) but the roadblocks have been more numerous and intense than these companies anticipated. Not to mention, the fact that many of them just don't have their hearts in it.
I do think GM CEO Mary Barra does. And when you see stuff like the prices for the new Chevy Equinox EV, you start to get why the Ultium battery and platform play makes sense.
Still, American investors don't love the costs involved (though they were fine to give Tesla a pass for a decade) and many question long-term demand. And even Cadillac has said it probably won't leave this decade all-electric as promised.
Barra got some tough questions at yesterday's annual shareholder meeting about EVs, and here's how she responded, according to the Detroit Free Press:
Barra did say that, ultimately, the composition of GM's future vehicle lineup will be guided by customer demand. That appeared to be an easing of GM's previous stance that all of its new vehicles would be all-electric by 2035, but later in the day, a company spokesman said GM retains that goal.
Her comment came after a shareholder mentioned GM's news last month, as first reported by the Free Press, that GM's luxury brand Cadillac will likely not have an exclusively all-electric portfolio of vehicles by the end of the decade, which was an earlier target. Instead, it will continue to offer internal combustion engine vehicles, too.
"This is great news for many motorists who are not excited by EVs," the shareholder told Barra referring to Cadillac's change. "But is this just a temporary thing or will GM continue to resist the political pressure to impose electric vehicles on the public?"
Barra replied: “We have a great lineup of gas-powered, or what we call ICE vehicles, that are available right now and we have a great lineup of EVs that will continue to grow. We’ll be covering the portfolio from a segment perspective and arranged perspective of pricing, design, et cetera. So we believe we’re well-positioned and we will be customer-focused as we go through this transformation.”
And here's what Barra said earlier that day to NBC News:
In an exclusive interview with NBC News, Barra clarified the company's previously stated intention to eventually phase out gas-powered cars.
"I wouldn’t say we’re recommitting," Barra said of the company's pledge, first announced more than six years ago. "You know, we said back in 2018 that we’re committed to an all-electric future. But as we make this transformation, it’s going to happen over decades. And that’s why I couldn’t be more proud of our gas-powered fleet as well."
In a statement after this article was published, a spokesperson for GM said the company is actually aiming to exclusively sell electric vehicles by 2035.
This is all hard to parse, but it seems like GM's "official" goal is still going all-EV by 2035, but there's a very real possibility a full EV transition will take decades instead. Which is, I think, a more realistic view of the situation from a business standpoint; from a climate one, it's a far worse story.
I tend to gauge an automaker's EV commitment by what they're actually doing, selling, planning and unveiling; GM is doing a lot there, and I'm very eager to see how the numbers play out this year with Equinox EV and Blazer EV. I wouldn't say they're "backing off" yet, unlike Mercedes-Benz and a few others. And I'm quite a bit more optimistic about GM overall than I was at the end of 2023. But we'll see.
Welcome to the long war, Mary,
100%: Are You Voting Yes Or No On Elon's Comp Package? Or, How Would You Vote?
I don't know if you're a Tesla shareholder or not. Unlike other publications that you may read, nobody who works for InsideEVs is allowed to hold stock (outside of incidentals in index funds or whatever) in companies we cover, so I'm not involved in that discussion either.
But would you vote yes or no on Musk's compensation package? And if you are a Tesla investor, how do you plan to vote?
Contact the author: patrick.george@insideevs.com
