Tesla stock price drops as cost-cutting clouds its ambitions in artificial intelligence and robotics.

Reuters, October 22 - In pre-market trading on Thursday, Tesla (TSLA.O) shares fell by 5%, after the electric vehicle manufacturer lowered its capital expenditure outlook, raising market concerns about the progress of investments behind Elon Musk's ambitions in artificial intelligence, robotics, and autonomous driving.

On Wednesday, the company reduced its projected capital expenditure for 2026 from over $25 billion (link) to about $20 billion, following third-quarter spending in artificial intelligence and robotics that was much lower than expected, which unexpectedly resulted in positive free cash flow.

As CEO Musk explores merging Tesla with SpaceX SPCX.O, whose capital intensity is far higher than Tesla's (link), this strong financial position could prove especially valuable.

However, the JPMorgan analyst team led by Rajat Gupta wrote in a research report, "Investors may have mixed feelings about this. Delaying spending helps ease short-term cash drain but also means postponing investments crucial to achieving long-term opportunities."

The brokerage noted that management’s comments on Wednesday indicated that, as Tesla continues funding milestone projects such as autonomous taxis, Optimus, AI computing, and Terafab, expenditure will surge in 2027 and 2028.

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So far this year, Tesla's share price has fallen by about 14%, while the Nasdaq index .IXIC has risen by roughly 15%. The stock is about 23% below the all-time intraday high of $498.83 set in December 2025.

Nonetheless, its valuation remains much higher than peers: Tesla's price-to-earnings ratio (based on future earnings forecasts) is 188.24, compared to Ford's 6.58 (F.N) and General Motors’ 5.16 (GM.N).

"The risk is that Tesla may now enter a period of suspense, with investors waiting for news about its potential merger with SpaceX, and that deal... could face significant regulatory hurdles," said AJ Bell Investment Director Russ Mould.

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