JPMorgan Warns Tesla Shares Could Fall Another 60%, Can Musk Still Turn the Tide?

TradingKey - JPMorgan ( JPM )'s latest research report issued a red alert for Tesla ( TSLA ), as analyst Ryan Brinkman lowered the stock's year-end price target to $145, implying that Tesla could face a nearly 60% plunge from its current share price of approximately $352.

As the worst performer among the 'Magnificent Seven' U.S. stocks, Tesla's share price has already fallen 20% this year, and this warning undoubtedly adds to the dampened market sentiment.

Brinkman pointed out that market expectations for Tesla's performance peaked in mid-2022, when the consensus estimate for first-quarter earnings per share once reached as high as $3.68. However, his current forecast for this metric is just $0.30, which is 21% lower than the market consensus of $0.38. More concerningly, EPS expectations for 2030 have slumped 38% compared to 2022 levels. This continuous downward revision of long-term expectations directly shakes market confidence in Tesla's ability to achieve its forward-looking goals.

Record levels of unsold inventory are the core basis for JPMorgan's bearish view on Tesla. Tesla delivered only 358,000 electric vehicles in the first quarter of 2026, lower than the market expectation of 370,000 and 7% lower than JPMorgan's own forecast of 385,000. Although deliveries grew 6.3% year-over-year, this growth was built on a low base from the same period last year and represented a significant quarter-over-quarter decline from the historical peak in the fourth quarter of last year.

More critical is the ongoing escalation of the inventory crisis, as Tesla's production exceeded deliveries by 50,363 units in the first quarter, setting a record high for single-quarter inventory buildup.

Since the first quarter of 2023, Tesla's production has increased by 80%, but vehicle sales have declined by 15%. This abnormal trend of 'producing more but selling less' is exacerbating its free cash flow predicament. Brinkman warned that Tesla's current cash flow situation is no longer sufficient to support its ambitious expansion plans.

He also noted that Tesla's delivery volume peaked as early as the beginning of June 2022, yet its stock price has risen approximately 50% since then. The severe divergence between the stock price and fundamentals suggests that Wall Street is pricing in a narrative that has yet to materialize: as Tesla's vehicle sales continue to decline, investors are pinning their hopes on projects such as robotaxis and humanoid robots.

Brinkman wrote: "If there is any takeaway from the vast gap between the aforementioned performance and early expectations, and the continuous downward revision of average future performance expectations, it is this: even if the bright future envisioned by bullish investors can be fully realized... its timing may differ significantly from what was imagined."

Tesla's Survival Challenge

Tesla is at the center of market controversy as multiple external pressures continue to erode its earnings base. Weak demand in the U.S. market and intensifying industry competition have become the primary challenges currently facing the company.

The Trump administration's late-year cancellation of the $7,500 federal EV tax credit directly dampened domestic demand in the U.S., while the persistent high-interest-rate environment has significantly driven up financing costs for consumers, further suppressing market purchasing power.

Meanwhile, Chinese EV brands led by BYD continue to gain global market share, leveraging product lineups tailored to market needs and superior cost-performance ratios. Legacy automakers such as Mercedes-Benz, GM, and Ford are accelerating their electrification transitions, launching competitive products backed by deep technical expertise and established distribution channels.

Wall Street investment banks are clearly divided on the outlook for Tesla's stock price. Compared to JPMorgan, HSBC has taken a more aggressive stance, setting a target price of $131 with an equivalent "Underweight" rating.

However, some analysts remain optimistic. Cantor Fitzgerald's Andres Sheppard believes that Tesla's recent share price weakness has provided a "favorable entry point," assigning an "Overweight" rating and a price target of $510. Baird analyst Ben Kallo lowered his target price from $548 to $538 but remains bullish on the company's long-term potential.

To address current difficulties, Elon Musk stated that 2026 will be Tesla's "year of transformation," rolling out a series of aggressive initiatives to bolster market confidence.

Production of the Cybercab, a dedicated autonomous taxi, officially began this month, with plans to expand Robotaxi services from two cities to nine within the year. Mass production of the Optimus humanoid robot is expected to launch later this year, alongside the rollout of the next-generation Roadster and the Megapack 3 energy storage system.

Elon Musk Builds Terawatt-Scale Chip Factory

Tesla CEO Elon Musk previously announced that he will partner with SpaceX and xAI to build the world's largest chip manufacturing project, Terafab. This plan aims for an annual production of 1 terawatt of computing power—equivalent to 50 times the current global total AI computing output—to provide core computing support for Tesla's robotaxis, humanoid robots, and SpaceX's space data centers.

The core driver behind Musk's launch of the Terafab project is the explosive growth in computing power demand from his various businesses. He admitted on the social platform X: "The current rate of expansion in the chip industry is far lower than we expected. We either build Terafab, or we face a chip shortage."

According to estimates, Tesla's Optimus humanoid robot alone requires 100 to 200 gigawatts of chips, while SpaceX's space AI satellite network requires terawatt-level computing support. This demand far exceeds the combined capacity of all current global chip manufacturers.

At the same time, Musk's dissatisfaction with existing supply chains is also a major factor. He has publicly stated multiple times that traditional chip manufacturers such as Samsung and TSMC ( TSM) are unable to meet his customization needs and have excessively long lead times. The Terafab project will integrate the entire process of chip design, lithography, manufacturing, memory production, advanced packaging, and testing to achieve a closed loop from R&D to mass production, significantly accelerating chip iteration speeds.

According to Musk's plan, Terafab will consist of two large wafer fabs located in Austin, Texas. The initial investment is expected to be $25 billion, with the final scale potentially exceeding $100 billion.

The greatest challenges for the Terafab project are funding and time. Musk initially estimated start-up costs at $20 billion to $25 billion, but Morgan Stanley calculates that the actual total cost could be as high as $35 billion to $45 billion. Bernstein points out even more aggressively that achieving 1 terawatt of annual computing power could require a total investment of $5 trillion to $13 trillion, a figure that far exceeds Tesla's 2026 capital expenditure plan of $20 billion.

Industry consensus is that it typically takes 3 to 5 years for an advanced wafer fab to move from construction to stable mass production. Given Tesla's lack of experience in chip manufacturing, the project schedule may face further delays. Currently, Musk has not released a definitive timetable for mass production.

Technical bottlenecks also cannot be ignored. The production of advanced process chips is heavily dependent on extreme ultraviolet (EUV) lithography machines. ASML, the world's sole supplier, has equipment lead times exceeding 12 months and prices of more than $200 million per unit, making equipment supply a potential major bottleneck for the project's progress.