General Motors Stock Surged 65% Over the Past Year. Is Now the Time to Buy?

General Motors (NYSE: GM) stock has been a stand-out performer over the past year, beating both the S&P 500 and many of its automotive peers. The stock has surged 65% in that period, and some analysts believe it could jump 55% from its current level.

The enthusiasm is driven by GM's current share repurchases and, in my opinion, overly optimistic views of the automotive market. Here's what's happening with GM right now, and why I'm not convinced that buying the stock is the right move.

Image source: Getty Images.

Share repurchases and new business opportunities

GM has made significant stock repurchases over the past five years, totaling about $30 billion. More buybacks are on the way, too, with management announcing at the beginning of this year that the company would repurchase another $6 billion of its shares.

That's a lot of buybacks, and it's helped add value to existing GM shareholders. When a company buys its own shares, it reduces the number of shares for sale and improves the company's earnings per share. It also signals to investors that the stock is undervalued, prompting some to swoop in and buy, pushing share prices higher.

That's just one reason for the recent gains in GM stock. The other is coming from GM's new business opportunities. The company recently announced that, like Ford Motor Company, it's entering the energy storage business. Automakers poured billions of dollars into building an electric vehicle future that hasn't quite panned out. Now, GM and others are looking to recoup some of their EV investments by selling batteries for energy storage at data centers.

GM also recently announced that it's working with Lockheed Martin to help the aerospace company improve its supply chain efficiency and expand its manufacturing. Lockheed is reportedly spending $9 billion by 2030 to modernize its facilities. It's hard to say how much the new defense and energy business will boost the company's sales, but investors have mostly reacted positively to the news.

The surge of optimism is a bit misplaced

I understand why investors are happy to see GM move into new business opportunities, but I think some of the runaway gains in GM stock are mostly driven by overly enthusiastic optimism.

GM's share repurchase program is fueling some of the share price gains. But those hoping GM will continue to march higher on the back of its recent announcements about energy storage devices and defense supply chains may be forgetting that GM is still primarily an automotive company.

And the auto industry is struggling right now. Years of rising material costs, tariffs, inflation, and high interest rates are straining both automakers and consumers. Consider that the average cost of a new car is above $50,000 now. Many vehicle prices are much higher, though, and the average monthly payment for a new vehicle is a staggering $773.

That's weighing down car buyers, and it's already becoming a problem. The rate of default on new vehicle loans has reached its highest level since 2010. U.S. annual vehicle sales are estimated to be 16.3 million this year, only slightly above the 16 million sold last year and less than the 17 million-plus sold in each of the five years leading up to the COVID-19 pandemic.

What's more, traditional automakers like GM continue to face intense competitive pressure from Chinese automakers, which are expanding their market share across the globe. Sales for GM's Chinese subsidiary fell 22% in Q1 2026.

In short, buyers are struggling under the weight of high vehicle costs in the U.S., fierce competition is heating up, and automakers are selling fewer cars than they did years ago.

And yet GM's stock is surging higher. I think the rise might have more to do with overly optimistic investors looking past current hurdles and focusing too much on a booming stock market. Add some potential business diversification from GM into the mix, and investors all of a sudden believe GM is no longer an automotive company.

I could be wrong, but I don't think it's worth buying GM stock based on its current energy and defense plans. Instead, I think investors may be better off sitting on the sidelines and seeing how all of this plays out for GM over the next year or so.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool recommends General Motors and Lockheed Martin. The Motley Fool has a disclosure policy.