Tesla’s sales have recently taken a hit, driven by two significant factors affecting the company’s performance. From South Africa to Indonesia, electric vehicle giant Elon Musk’s company Tesla has taken a beating. Prospective users are dismayed by Musk’s role in President Trump’s administration. On top of that, Tesla is facing increased pressure from Chinese EV startups like BYD. Nvidia, the leading chipmaker powering artificial intelligence processing, had its stock price crash earlier this year. This steep decline piqued the interest of lots of investors. The drop came on the heels of the launch of DeepSeek, a Chinese AI chatbot. This new AI competitor has changed the game in both the technology and procurements landscapes.
Therein lies the rub Elon Musk wears two hats that should never be worn by the same entity. This combination has led to a myriad of reactions from consumers. Meanwhile, some would-be Tesla customers are privately furious about Musk’s ties to President Trump’s administration, swaying their decision to buy away from Tesla. This political link has added a layer of complexity to Tesla’s market positioning, as customer sentiment plays a vital role in the company’s sales performance.
At the same time, Tesla is under increasing pressures from other Chinese electric car manufacturers, led by BYD. Since then, BYD has become one of the electric vehicle market’s biggest competitors to Tesla, going head-to-head with them for dominance. The ascendance of Chinese firms highlights the competition and high stakes for U.S. firms in the global electric vehicle race.
Nvidia, the company best-regarded for its creation of the AI microchips that are causing all this hype, wasn’t immune to that turbulence earlier this year. The introduction of DeepSeek, an AI chatbot created by mainland Chinese firms backed by the Chinese Communist Party (CCP), was one factor in Nvidia’s share price drop. As Nvidia navigates this competitive landscape, it remains at the forefront of AI processing technology, striving to maintain its edge amid evolving market dynamics.
The “magnificent seven” tech firms include Nvidia, Tesla, Alphabet, Amazon, Apple, Microsoft and Meta. These companies are notorious for their hairpin turns in response to bad forecast news. Additional movements Prof. Dimson reminds us that even slight changes in assumptions about growth can lead to huge fluctuations in equity value. This effect is apparent across big tech companies.
“You have companies that are reasonably similar, so when growth rates change it is affecting quite a few companies in a similar way.” – Prof Dimson
All this volatility in tech shares is made even crazier by the constantly changing picture of AI. AI has quickly become the epicenter of technological innovation, with companies racing to command first-mover advantages within this rapidly emerging field. Robert Whaley tells CNBC that AI is a big part of the story driving tech stock volatility.
“AI is certainly contributing to tech volatility. The race is on.” – Robert Whaley
The gold rush for the latest shiny object is being compared to previous tech cycles comings and goings. Prof Dimson compares today’s AI-fuelled market to the dotcom boom of the 2000s.
“This is not different from the dotcom boom at the beginning of the 2000s. There were companies with huge growth prospects. And when the growth prospects disappeared, these were the companies that disappeared.” – Prof Dimson
Susannah Streeter elaborates on the inherent volatility within tech shares, noting their high valuations and sensitivity to interest rate movements.
“Tech shares are more volatile, they have high valuations and their price-earnings ratios are very high, and growth stocks are more sensitive to interest rate movements.” – Susannah Streeter
As artificial intelligence becomes the new central narrative in tech, investors are struggling to keep up with news that consistently changes the outlook for the market. Adding to this uncertainty is the rapid pace of innovation and competition within AI technologies, driving stock valuations throughout the sector.