Tesla Stock Suffered Its Worst Week Since 2022, Falling 18% as Investors Balked at Elon Musk's Robotaxi and AI Spending Plans

Think you're having a rough summer? At least you haven't lost $300 billion like Tesla (NASDAQ: TSLA) CEO Elon Musk.

Musk made history this year when his other mammoth company, Space Exploration Technologies, went public, pushing Musk's personal wealth to more than $1 trillion. He became the first -- and only -- trillionaire in recorded history.

But it didn't last. SpaceX stock has fallen below its initial public offering price, and Tesla is hemorrhaging value following the company's second-quarter earnings report. Even though Tesla reported strong revenue -- and posted more than $100 billion in trailing-12-month sales for the first time -- the stock fell by 18% in a single week after July 22 earnings, its worst one-week performance since 2022.

How extensive is Musk's loss? According to the Bloomberg Billionaires Index, his net worth is now $709 billion. Musk lost more money in the last six weeks than anyone else on the list even possesses. (No. 2 on the list is Larry Page, the co-founder of Alphabet, with a net worth of $281 billion.) Musk acknowledged this loss in a social media post on X, simply writing, "(Former) Trillionaire."

Let's see why the market has turned on Tesla stock despite its strong revenue growth.

Tesla CEO Elon Musk. Image source: The White House.

The red flags surrounding Tesla now

Tesla's primary business is electric vehicles -- the company delivered 480,126 of them in the second quarter, up 25% from a year ago, and that resulted in most of Tesla's $28.23 billion revenue. Tesla said EV sales brought in $20.51 billion, up 23%.

The big problem, however, was Tesla's dwindling margins. Operating margins fell from 4.1% a year ago to just 1.4% in the second quarter of this year. Operating expenses jumped 47%, to $4.35 billion. Tesla reported negative free cash flow of $1.1 billion in the quarter, and its cash and investments dropped by $1.2 billion.

Capital expenditures more than doubled sequentially, according to CFO Vaibhav Taneja, and the company expects them to continue increasing in the second half of the year. Tesla issued guidance for $25 billion in capex spending for the year and announced plans to borrow up to $30 billion.

The market reacts

Undoubtedly, Tesla has huge plans that require enormous investment. Artificial intelligence is essential for Tesla's biggest bets, including self-driving technology and the Optimus robot line. The company is running early versions of its v15 autonomous driving software in robotaxis, but it's unclear when the technology will be ready for nationwide rollout -- or if regulators will sign off on it.

Meanwhile, Tesla is making room for Optimus robot production by discontinuing manufacturing lines at its Fremont, California, factory for Model S and X vehicles. Robots built on that line will be used for further training and development of the hardware and AI software, the company has said, but the technology appears to be a long way from commercial sales.

Tesla has always been priced for perfection, with a high forward price-to-earnings ratio that, even after a drop, still registers at an eye-watering 170. Investors have long been willing to buy and hold Tesla stock based on Musk's vision. But with dwindling margins, negative cash flow, doggedly high spending, and plans to borrow $30 billion, the shine appears to be coming off Tesla stock this summer.

Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Tesla. The Motley Fool has a disclosure policy.