Tesla’s Market Cap Has Never Reflected Its ProfitabilityAt its peak earnings in 2022, Tesla generated a 19.2% operating margin and an adjusted EPS of $4.07, with an average market cap of $691 billion that year, as both tech stocks and Tesla sold off heavily (Tesla dropped by a steeper rate of 65% versus the Nasdaq’s 33% due to Musk selling his shares to buy Twitter). As of Q2 2026, Tesla barely broke even, with an operating margin of 1.4% (0.9% excluding regulatory credits), yet its market cap of $1.1 trillion is nearly double that in 2022, when Tesla was immensely profitable (see Figure 1). Note that the blue bars in Figure 1 are Tesla’s average market cap in the 3 months following financial results, with Q2 2026 showing Tesla’s market cap as of yesterday. This is all due to Musk’s consistent manipulation of Tesla’s share price since 2024, when he began his “AI/robotics” pumps on a regular basis, to distract investors from Tesla’s deteriorating auto business. This is why Tesla currently trades at an EV/sales multiple of 16.6x, versus the sector average of 0.3x. Figure 1: Tesla’s Weak Operating Margins vs Its High Market CapSource: Tesla and Bloomberg. Nissan’s Example: Stock Price Hit by Flagging Car SalesIn normal markets, carmakers with deteriorating earnings see their stocks sell off, as is the case with Nissan, which is currently distressed, as its lack of new models has led its auto business to generate losses since Q2 2024. I wrote about the uncanny similarities between Nissan’s demise and what is currently happening at Tesla in this report (here). The only reason Nissan’s margins aren’t negative every quarter is due to its highly profitable finance division holding up the entire company. And while Nissan’s operating margin recovered to 2.6% last quarter, its market cap continues to decline as the improved margins were due to US tariff rebates.Figure 2: Nissan’s Sinking Market Cap and Operating MarginsSource: Nissan and Bloomberg. The Robotaxi Pump is Starting to WeakenMusk’s robotaxi pumps started in earnest on the Q1 2024 earnings call, after Tesla shares hit a low of $142 on April 22nd, the day before Q1 results. Despite the Nasdaq being up by 2.3%, Tesla had fallen by 42.8% year-to-date, due to reports that Musk had cancelled the highly anticipated “Model 2” compact EV that would have been priced at $25,000 and sell in the millions. Getting deliveries higher via this model was the guiding light for Tesla fans at the time, especially after Tesla reported that Q1 2024 deliveries dropped by 8.5% YoY, its first annual decline since the pandemic caused factory shutdowns in Q2 2020. Musk lied on the earnings call, saying Tesla would roll out 2 new affordable models instead of the Model 2, but would focus more on robotaxis. In an effort to distract investors’ attention from the 47% YoY EPS plunge on a 9% revenue drop in Q1 2024, Musk said on the call, “We should be thought of as an AI robotics company. If you value Tesla as just an auto company — it's just the wrong framework.” Despite the horrible Q1 results, the market embraced Musk’s prediction that Tesla was on the cusp of launching its robotaxi fleet: Tesla shares spiked by 12.1% the next day, and soared by another 34% over the next 4 trading days. The 2 new models turned out to be nothing more than stripped-down versions of the Model 3 and Y, and did little to stop a nearly 9% drop in 2025 deliveries after they were launched. And the robotaxi pump led to the unveiling of the Cybercab 6 months later, which is now facing a second “launch event” on September 3rd, most likely because Tesla has underperformed the Nasdaq by 12 percentage points since its horrible Q2 2026 results. In 3 of the 5 earnings misses before the Q1 2024 call, Tesla’s stock underperformed the Nasdaq over the following months until the next quarterly results. But in the 9 quarters since Musk’s proclamation that Tesla is an “AI robotics company” on the Q1 2024 call, Tesla earnings have missed Street estimates 6 times, and only underperformed the Nasdaq 3 times, including last quarter. Optimus is GoneAs is natural for most companies, a decline in profitability leads to a decline in valuation, but Musk bucked that trend with his lies about how robotaxis and Tesla’s “Optimus” humanoid bot would lead to Tesla reaching a market cap of over $25 trillion, or 20% of global GDP. There have been no Optimus updates or videos released since those in Videos 1 and 2 below from last year, after which the Optimus team left Tesla. Musk has delayed all of his promised Optimus Version 3.0 debut events for the past 6 months, saying that competitors would copy Tesla’s technology. The Optimus competitors have only become stronger, with Boston Dynamics scheduled to have its robots in all of Hyundai’s overseas factories from 2028, along with an IPO estimated to be around $120 billion. China’s Unitree just went public last week at a $9 billion valuation and now has a market cap of $35 billion. Video 1: Optimus Struggles to Get a Coke Source: Twitter. Video 2: Optimus Falls as Teleoperator Unplugs His VR GearSource: Twitter. Tesla’s “Driverless Robotaxis” Are Highly Teleoperated at BestMusk got Tesla shares to a new record high of $490 last December after releasing videos of Tesla employees taking driverless rides in Tesla robotaxis on Austin streets that month. This was followed by highly orchestrated videos of Tesla influencers taking “paid” driverless rides in January, but the market didn’t buy it, as these rides had teleoperators following in cars close behind. And, since January’s Q4 2025 earnings call, Musk has drastically toned down his narrative about having robotaxis serving “half of the US population”, saying that safety is “key”, and that Tesla’s new “AI5” chip would ensure safety after its rollout as soon as 2H 2027 (pointing to an epic delay). Moreover, despite Musk’s claim last October that Tesla would have 500 robotaxis in Austin by December [2025], there are only 92 in operation, according to Robotaxi Tracker (here). Signs of the Robotaxi Premium FadingDespite all of the highly orchestrated shows of driverless Tesla robotaxis since last year, Tesla shares have underperformed the Nasdaq over the following 3 months since Q3 2025. This is because even the most ardent Tesla fans have slowly begun to lose faith in Musk’s sky-high proclamations about robotaxis, with nothing to show for it each time. Figure 3 through Figure 5 show just how much Tesla fans are losing hope, which might explain why Tesla is down 23% versus the Nasdaq’s rise of 16% year-to-date. Figure 3: Tesla Fan No Longer Trusts Elon MuskSource: Twitter. Figure 4: Tesla Fan Doesn’t Trust Tesla’s CommentarySource: Twitter. Figure 5: Tesla Fan is Frustrated Over Slow Robotaxi RolloutSource: Twitter. More Proof of the Fading “Robotaxi” PremiumIn 2024, Tesla recorded its share price low of the year in April, at $142. In 2025, Tesla hit its $222 low of the year in March. This year, Tesla hit its low of the year at $298 on July 29th, just 5 trading days after one of its worst quarterly results. Figure 6 shows the annual share price trends of Tesla by day of the year, and while Tesla only hit its low for this year last month, its pattern is beginning to look like that of 2025, although I doubt it will retrace it. Figure 6: Tesla’s Annual Share Price PerformanceSource: Bloomberg. Retail Investors Realize They’re Being DupedTesla’s online community has always been passionate and often tribal. They’ve recently become divided into the “woke” (those who realize Musk is not to be trusted on his robotaxi proclamations) and the “defenders”, who insist that it’s just a matter of time. The drama has been as good as award-winning soap operas:Real user complaints from supporters themselves. Tesla ambassadors and multi-car owners have publicly detailed glitches: 66-minute estimates for 2.3-mile trips, drop-offs miles from the destination (sometimes because the vehicle’s “shift” ended), missed pickups, vehicles stuck in the road, or poor routing. Support responses and refunds have sometimes lagged until posts went viral. Defenders call it “expected beta/pilot behavior”.Expectation management splits. Optimists emphasize the unsupervised progress, weekly mile growth, smarter dispatching, upcoming Cybercab event, and long-term data/AI advantages. Prominent bulls who’ve turned skeptical point out the slow absolute scale, the higher crash reports, the operational constraints, and a history of Musk’s missed timelines. The real cause of discontent is the weak stock price. The long-time Tesla fans are starting to lose faith in Musk, as Tesla has massively underperformed the market over the past 5 years (see Figure 7). This frustration was amplified by the hype that began last March over the IPO of SpaceX, which now trades at a $1.85 trillion market cap, versus Tesla’s $1.15 trillion valuation. Figure 7: Tesla Fans Realizing How Weak the Stock Has BeenSource: Twitter. September 3rd Cybercab Event is Just Another Stock PumpGiven Tesla’s huge underperformance versus the market year-to-date, it’s no surprise that Musk announced a Cybercab “launch” event on September 3rd, despite the fact that it debuted in October 2024 and Tesla confirmed its production launch in April. Figure 8 shows Tesla’s annual share price performance versus the Nasdaq 100, with 2026 price action as of yesterday. Unless things change, Tesla is on track to underperform the market for the second time in a row in 2026. Figure 8: Tesla’s Share Price Performance vs the Nasdaq 100Source: Bloomberg. The Cybercab launch event on September 3rd comes amid the following bad news for Tesla and its continued failure to scale its “robotaxi” fleet:FSD crash data has increased nearly as much as FSD Supervised miles driven, and is now worse than Waymo’s safety data, as explained in my report Tuesday (here), and as displayed in Figure 9 below. Robotaxi crash rates are worse than human drivers, both in terms of miles before collisions, and especially miles before injury crashes (see Figure 10 below). Q3 2026 deliveries are showing signs of a sequential decline versus Q2, which hit its 2nd record high, yet led to only a 1.4% operating margin. Figure 9: FSD Supervised Safety vs Waymo’s Driverless DataSource: NHTSA, Tesla, & Waymo data. Figure 10: Tesla’s Robotaxis Are Less Safe Than Human DriversSource: NHTSA, Tesla, & Waymo data. The biggest indication of Tesla’s fading “robotaxi premium” is shown in Figure 11 below: Tesla’s share price has underperformed the Nasdaq since Q3 2025 (when US sales spiked ahead of the $7,500 EV subsidy being canceled), as its operating margins have sequentially declined each quarter. Figure 11: Tesla’s Stock Underperforms as Margins DeteriorateSource: Tesla and Bloomberg. Note that Q2 2026 relative share price performance is calculated on yesterday’s prices. And this is not because the Vested Interests haven’t tried to support Tesla’s share price after SpaceX’s IPO overshadowed Tesla. Figure 12: Trading Volumes in Tesla and SpaceX OptionsSource: Nasdaq. And finally, the valuation support to buy Tesla on the dip is quickly fading, as shown in Figure 13 below. Have a great weekend!Figure 13: Tesla’s Returns & Valuations vs RivalsSource: Company data, Bloomberg, and MH estimates. NOTE: NOTHING IN THIS REPORT IS INVESTMENT ADVICE.